Correlation Between Penpower Technology and Strong H

Can any of the company-specific risk be diversified away by investing in both Penpower Technology and Strong H 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 Penpower Technology and Strong H into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penpower Technology and Strong H Machinery, you can compare the effects of market volatilities on Penpower Technology and Strong H 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 Penpower Technology with a short position of Strong H. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penpower Technology and Strong H.

Diversification Opportunities for Penpower Technology and Strong H

0.49

Correlation Coefficient

Penpower Technology  Strong H

Very weak diversification

The 3 months correlation between Penpower and Strong is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Penpower Technology and Strong H Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strong H Machinery and Penpower Technology 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 Penpower Technology are associated (or correlated) with Strong H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strong H Machinery has no effect on the direction of Penpower Technology i.e., Penpower Technology and Strong H go up and down completely randomly.

Pair Corralation between Penpower Technology and Strong H

Assuming the 90 days trading horizon Penpower Technology is expected to generate 1.36 times less return on investment than Strong H. In addition to that, Penpower Technology is 2.04 times more volatile than Strong H Machinery. It trades about 0.05 of its total potential returns per unit of risk. Strong H Machinery is currently generating about 0.14 per unit of volatility. If you would invest  3,220  in Strong H Machinery on September 16, 2024 and sell it today you would earn a total of  350.00  from holding Strong H Machinery or generate 10.87% return on investment over 90 days.

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

Penpower Technology  vs.  Strong H Machinery

Penpower Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penpower Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Penpower Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Strong H Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strong H Machinery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Strong H may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Penpower Technology and Strong H

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

The idea behind Penpower Technology and Strong H Machinery 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.