Correlation Between Solution Advanced and PJ Electronics

Can any of the company-specific risk be diversified away by investing in both Solution Advanced and PJ Electronics 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 Solution Advanced and PJ Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solution Advanced Technology and PJ Electronics Co, you can compare the effects of market volatilities on Solution Advanced and PJ Electronics 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 Solution Advanced with a short position of PJ Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solution Advanced and PJ Electronics.

Diversification Opportunities for Solution Advanced and PJ Electronics

0.76

Correlation Coefficient

Solution Advanced  PJ Electronics

Poor diversification

The 3 months correlation between Solution and 006140 is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics and Solution Advanced 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 Solution Advanced Technology are associated (or correlated) with PJ Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Electronics has no effect on the direction of Solution Advanced i.e., Solution Advanced and PJ Electronics go up and down completely randomly.

Pair Corralation between Solution Advanced and PJ Electronics

Assuming the 90 days trading horizon Solution Advanced is expected to generate 1.72 times less return on investment than PJ Electronics. In addition to that, Solution Advanced is 2.9 times more volatile than PJ Electronics Co. It trades about 0.05 of its total potential returns per unit of risk. PJ Electronics Co is currently generating about 0.25 per unit of volatility. If you would invest  520,000  in PJ Electronics Co on December 5, 2024 and sell it today you would earn a total of  80,000  from holding PJ Electronics Co or generate 15.38% return on investment over 90 days.

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

Solution Advanced Technology  vs.  PJ Electronics Co

Solution Advanced

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Advanced Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solution Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

PJ Electronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PJ Electronics Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PJ Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solution Advanced and PJ Electronics

The main advantage of trading using opposite Solution Advanced and PJ Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solution Advanced position performs unexpectedly, PJ Electronics 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 PJ Electronics will offset losses from the drop in PJ Electronics' long position.

The idea behind Solution Advanced Technology and PJ Electronics Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.