Correlation Between PPHE HOTEL and PC Connection

Can any of the company-specific risk be diversified away by investing in both PPHE HOTEL and PC Connection at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PPHE HOTEL and PC Connection into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PPHE HOTEL GROUP and PC Connection, you can compare the effects of market volatilities on PPHE HOTEL and PC Connection and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PPHE HOTEL with a short position of PC Connection. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPHE HOTEL and PC Connection.

Diversification Opportunities for PPHE HOTEL and PC Connection

0.21

Correlation Coefficient

PPHE HOTEL  PC Connection

Modest diversification

The 3 months correlation between PPHE and PCC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PPHE HOTEL GROUP and PC Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PC Connection and PPHE HOTEL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PPHE HOTEL GROUP are associated (or correlated) with PC Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PC Connection has no effect on the direction of PPHE HOTEL i.e., PPHE HOTEL and PC Connection go up and down completely randomly.

Pair Corralation between PPHE HOTEL and PC Connection

Assuming the 90 days trading horizon PPHE HOTEL is expected to generate 3.15 times less return on investment than PC Connection. But when comparing it to its historical volatility, PPHE HOTEL GROUP is 1.05 times less risky than PC Connection. It trades about 0.02 of its potential returns per unit of risk. PC Connection is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,695  in PC Connection on October 26, 2024 and sell it today you would earn a total of  2,205  from holding PC Connection or generate 46.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PPHE HOTEL GROUP  vs.  PC Connection

PPHE HOTEL GROUP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE HOTEL GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PPHE HOTEL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

PC Connection

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PC Connection are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PC Connection may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PPHE HOTEL and PC Connection

The main advantage of trading using opposite PPHE HOTEL and PC Connection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPHE HOTEL position performs unexpectedly, PC Connection can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PC Connection will offset losses from the drop in PC Connection's long position.

The idea behind PPHE HOTEL GROUP and PC Connection pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.