Correlation Between Pengxin International and Threes Company

Can any of the company-specific risk be diversified away by investing in both Pengxin International and Threes Company 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 Pengxin International and Threes Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pengxin International Mining and Threes Company Media, you can compare the effects of market volatilities on Pengxin International and Threes Company 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 Pengxin International with a short position of Threes Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pengxin International and Threes Company.

Diversification Opportunities for Pengxin International and Threes Company

0.73

Correlation Coefficient

Pengxin International  Threes Company

Poor diversification

The 3 months correlation between Pengxin and Threes is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pengxin International Mining and Threes Company Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Threes Company and Pengxin International 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 Pengxin International Mining are associated (or correlated) with Threes Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Threes Company has no effect on the direction of Pengxin International i.e., Pengxin International and Threes Company go up and down completely randomly.

Pair Corralation between Pengxin International and Threes Company

Assuming the 90 days trading horizon Pengxin International Mining is expected to under-perform the Threes Company. But the stock apears to be less risky and, when comparing its historical volatility, Pengxin International Mining is 1.12 times less risky than Threes Company. The stock trades about -0.01 of its potential returns per unit of risk. The Threes Company Media is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,428  in Threes Company Media on October 7, 2024 and sell it today you would lose (259.00) from holding Threes Company Media or give up 7.56% of portfolio value over 90 days.

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

Pengxin International Mining  vs.  Threes Company Media

Pengxin International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pengxin International Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pengxin International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Threes Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Threes Company Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Threes Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pengxin International and Threes Company

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

The idea behind Pengxin International Mining and Threes Company Media 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.