Correlation Between PT Ace and PUBLIC STORAGE

Can any of the company-specific risk be diversified away by investing in both PT Ace and PUBLIC STORAGE 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 PT Ace and PUBLIC STORAGE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Ace Hardware and PUBLIC STORAGE PRFO, you can compare the effects of market volatilities on PT Ace and PUBLIC STORAGE 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 PT Ace with a short position of PUBLIC STORAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Ace and PUBLIC STORAGE.

Diversification Opportunities for PT Ace and PUBLIC STORAGE

0.4

Correlation Coefficient

PT Ace  PUBLIC STORAGE

Very weak diversification

The 3 months correlation between 4AH1 and PUBLIC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding PT Ace Hardware and PUBLIC STORAGE PRFO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUBLIC STORAGE PRFO and PT Ace 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 PT Ace Hardware are associated (or correlated) with PUBLIC STORAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUBLIC STORAGE PRFO has no effect on the direction of PT Ace i.e., PT Ace and PUBLIC STORAGE go up and down completely randomly.

Pair Corralation between PT Ace and PUBLIC STORAGE

Assuming the 90 days trading horizon PT Ace Hardware is expected to generate 8.26 times more return on investment than PUBLIC STORAGE. However, PT Ace is 8.26 times more volatile than PUBLIC STORAGE PRFO. It trades about 0.05 of its potential returns per unit of risk. PUBLIC STORAGE PRFO is currently generating about -0.05 per unit of risk. If you would invest  3.75  in PT Ace Hardware on October 6, 2024 and sell it today you would earn a total of  0.05  from holding PT Ace Hardware or generate 1.33% return on investment over 90 days.

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

PT Ace Hardware  vs.  PUBLIC STORAGE PRFO

PT Ace Hardware

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PT Ace Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PUBLIC STORAGE PRFO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC STORAGE PRFO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PUBLIC STORAGE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Ace and PUBLIC STORAGE

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

The idea behind PT Ace Hardware and PUBLIC STORAGE PRFO 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.