Correlation Between Topco Scientific and Powertech Technology

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

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

Diversification Opportunities for Topco Scientific and Powertech Technology

0.46

Correlation Coefficient

Topco Scientific  Powertech Technology

Very weak diversification

The 3 months correlation between Topco and Powertech is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Topco Scientific Co and Powertech Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Technology and Topco Scientific 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 Topco Scientific Co are associated (or correlated) with Powertech Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Technology has no effect on the direction of Topco Scientific i.e., Topco Scientific and Powertech Technology go up and down completely randomly.

Pair Corralation between Topco Scientific and Powertech Technology

Assuming the 90 days trading horizon Topco Scientific Co is expected to under-perform the Powertech Technology. But the stock apears to be less risky and, when comparing its historical volatility, Topco Scientific Co is 1.68 times less risky than Powertech Technology. The stock trades about -0.09 of its potential returns per unit of risk. The Powertech Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  12,300  in Powertech Technology on December 4, 2024 and sell it today you would earn a total of  200.00  from holding Powertech Technology or generate 1.63% return on investment over 90 days.

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

Topco Scientific Co  vs.  Powertech Technology

Topco Scientific

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topco Scientific Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Powertech Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Powertech Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Powertech Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Topco Scientific and Powertech Technology

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

The idea behind Topco Scientific Co and Powertech 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.