Correlation Between Pan Asia and Cayenne Entertainment

Can any of the company-specific risk be diversified away by investing in both Pan Asia and Cayenne Entertainment 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 Pan Asia and Cayenne Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pan Asia Chemical and Cayenne Entertainment Technology, you can compare the effects of market volatilities on Pan Asia and Cayenne Entertainment 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 Pan Asia with a short position of Cayenne Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Asia and Cayenne Entertainment.

Diversification Opportunities for Pan Asia and Cayenne Entertainment

0.6

Correlation Coefficient

Pan Asia  Cayenne Entertainment

Poor diversification

The 3 months correlation between Pan and Cayenne is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Chemical and Cayenne Entertainment Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cayenne Entertainment and Pan Asia 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 Pan Asia Chemical are associated (or correlated) with Cayenne Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cayenne Entertainment has no effect on the direction of Pan Asia i.e., Pan Asia and Cayenne Entertainment go up and down completely randomly.

Pair Corralation between Pan Asia and Cayenne Entertainment

Assuming the 90 days trading horizon Pan Asia Chemical is expected to generate 0.36 times more return on investment than Cayenne Entertainment. However, Pan Asia Chemical is 2.77 times less risky than Cayenne Entertainment. It trades about -0.04 of its potential returns per unit of risk. Cayenne Entertainment Technology is currently generating about -0.07 per unit of risk. If you would invest  1,485  in Pan Asia Chemical on September 14, 2024 and sell it today you would lose (65.00) from holding Pan Asia Chemical or give up 4.38% of portfolio value over 90 days.

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

Pan Asia Chemical  vs.  Cayenne Entertainment Technolo

Pan Asia Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan Asia Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pan Asia is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cayenne Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cayenne Entertainment Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Pan Asia and Cayenne Entertainment

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

The idea behind Pan Asia Chemical and Cayenne Entertainment Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.