Correlation Between Planet Technology and PlayNitride

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

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

Diversification Opportunities for Planet Technology and PlayNitride

-0.06

Correlation Coefficient

Planet Technology  PlayNitride

Good diversification

The 3 months correlation between Planet and PlayNitride is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Planet Technology and PlayNitride in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayNitride and Planet 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 Planet Technology are associated (or correlated) with PlayNitride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayNitride has no effect on the direction of Planet Technology i.e., Planet Technology and PlayNitride go up and down completely randomly.

Pair Corralation between Planet Technology and PlayNitride

Assuming the 90 days trading horizon Planet Technology is expected to generate 0.2 times more return on investment than PlayNitride. However, Planet Technology is 4.96 times less risky than PlayNitride. It trades about 0.26 of its potential returns per unit of risk. PlayNitride is currently generating about 0.05 per unit of risk. If you would invest  14,800  in Planet Technology on December 5, 2024 and sell it today you would earn a total of  900.00  from holding Planet Technology or generate 6.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Planet Technology  vs.  PlayNitride

Planet Technology

Risk-Adjusted Performance

Very Weak

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

PlayNitride

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PlayNitride are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PlayNitride showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Technology and PlayNitride

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

The idea behind Planet Technology and PlayNitride 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 Commodity Directory module to find actively traded commodities issued by global exchanges.