Correlation Between PIE Industrial and Press Metal

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

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

Diversification Opportunities for PIE Industrial and Press Metal

0.07

Correlation Coefficient

PIE Industrial  Press Metal

Significant diversification

The 3 months correlation between PIE and Press is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding PIE Industrial Bhd and Press Metal Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Press Metal Bhd and PIE Industrial 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 PIE Industrial Bhd are associated (or correlated) with Press Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Press Metal Bhd has no effect on the direction of PIE Industrial i.e., PIE Industrial and Press Metal go up and down completely randomly.

Pair Corralation between PIE Industrial and Press Metal

Assuming the 90 days trading horizon PIE Industrial is expected to generate 1.16 times less return on investment than Press Metal. But when comparing it to its historical volatility, PIE Industrial Bhd is 1.37 times less risky than Press Metal. It trades about 0.08 of its potential returns per unit of risk. Press Metal Bhd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  468.00  in Press Metal Bhd on September 27, 2024 and sell it today you would earn a total of  12.00  from holding Press Metal Bhd or generate 2.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

PIE Industrial Bhd  vs.  Press Metal Bhd

PIE Industrial Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIE Industrial Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, PIE Industrial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Press Metal Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Press Metal Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Press Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PIE Industrial and Press Metal

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

The idea behind PIE Industrial Bhd and Press Metal Bhd 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.