Correlation Between Advanced Drainage and Polyplex (Thailand)

Can any of the company-specific risk be diversified away by investing in both Advanced Drainage and Polyplex (Thailand) 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 Advanced Drainage and Polyplex (Thailand) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Drainage Systems and Polyplex Public, you can compare the effects of market volatilities on Advanced Drainage and Polyplex (Thailand) 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 Advanced Drainage with a short position of Polyplex (Thailand). Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Drainage and Polyplex (Thailand).

Diversification Opportunities for Advanced Drainage and Polyplex (Thailand)

-0.7

Correlation Coefficient

Advanced Drainage  Polyplex (Thailand)

Excellent diversification

The 3 months correlation between Advanced and Polyplex is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Drainage Systems and Polyplex Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polyplex (Thailand) and Advanced Drainage 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 Advanced Drainage Systems are associated (or correlated) with Polyplex (Thailand). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polyplex (Thailand) has no effect on the direction of Advanced Drainage i.e., Advanced Drainage and Polyplex (Thailand) go up and down completely randomly.

Pair Corralation between Advanced Drainage and Polyplex (Thailand)

Assuming the 90 days horizon Advanced Drainage is expected to generate 2.48 times less return on investment than Polyplex (Thailand). But when comparing it to its historical volatility, Advanced Drainage Systems is 2.92 times less risky than Polyplex (Thailand). It trades about 0.04 of its potential returns per unit of risk. Polyplex Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Polyplex Public on September 23, 2024 and sell it today you would earn a total of  10.00  from holding Polyplex Public or generate 47.62% return on investment over 90 days.

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

Advanced Drainage Systems  vs.  Polyplex Public

Advanced Drainage Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Drainage Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Polyplex (Thailand)

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polyplex Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Polyplex (Thailand) reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Drainage and Polyplex (Thailand)

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

The idea behind Advanced Drainage Systems and Polyplex Public 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.