Correlation Between Plastron Precision and ABC Taiwan

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Can any of the company-specific risk be diversified away by investing in both Plastron Precision and ABC Taiwan 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 Plastron Precision and ABC Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plastron Precision Co and ABC Taiwan Electronics, you can compare the effects of market volatilities on Plastron Precision and ABC Taiwan 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 Plastron Precision with a short position of ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plastron Precision and ABC Taiwan.

Diversification Opportunities for Plastron Precision and ABC Taiwan

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Plastron and ABC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Plastron Precision Co and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and Plastron Precision 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 Plastron Precision Co are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Plastron Precision i.e., Plastron Precision and ABC Taiwan go up and down completely randomly.

Pair Corralation between Plastron Precision and ABC Taiwan

Assuming the 90 days trading horizon Plastron Precision Co is expected to generate 0.61 times more return on investment than ABC Taiwan. However, Plastron Precision Co is 1.65 times less risky than ABC Taiwan. It trades about 0.01 of its potential returns per unit of risk. ABC Taiwan Electronics is currently generating about -0.01 per unit of risk. If you would invest  1,510  in Plastron Precision Co on October 11, 2024 and sell it today you would earn a total of  5.00  from holding Plastron Precision Co or generate 0.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Plastron Precision Co  vs.  ABC Taiwan Electronics

 Performance 
       Timeline  
Plastron Precision 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Plastron Precision and ABC Taiwan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Plastron Precision and ABC Taiwan

The main advantage of trading using opposite Plastron Precision and ABC Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastron Precision position performs unexpectedly, ABC Taiwan 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 ABC Taiwan will offset losses from the drop in ABC Taiwan's long position.
The idea behind Plastron Precision Co and ABC Taiwan Electronics 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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