Correlation Between PKSHA TECHNOLOGY and Patterson Companies

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

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

Diversification Opportunities for PKSHA TECHNOLOGY and Patterson Companies

0.23

Correlation Coefficient

PKSHA TECHNOLOGY  Patterson Companies

Modest diversification

The 3 months correlation between PKSHA and Patterson is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding PKSHA TECHNOLOGY INC and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies and PKSHA 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 PKSHA TECHNOLOGY INC are associated (or correlated) with Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of PKSHA TECHNOLOGY i.e., PKSHA TECHNOLOGY and Patterson Companies go up and down completely randomly.

Pair Corralation between PKSHA TECHNOLOGY and Patterson Companies

Assuming the 90 days horizon PKSHA TECHNOLOGY INC is expected to under-perform the Patterson Companies. In addition to that, PKSHA TECHNOLOGY is 3.92 times more volatile than Patterson Companies. It trades about -0.05 of its total potential returns per unit of risk. Patterson Companies is currently generating about -0.06 per unit of volatility. If you would invest  2,960  in Patterson Companies on December 21, 2024 and sell it today you would lose (100.00) from holding Patterson Companies or give up 3.38% of portfolio value over 90 days.

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

PKSHA TECHNOLOGY INC  vs.  Patterson Companies

PKSHA TECHNOLOGY INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days PKSHA TECHNOLOGY INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Patterson Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Patterson Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Patterson Companies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PKSHA TECHNOLOGY and Patterson Companies

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

The idea behind PKSHA TECHNOLOGY INC and Patterson Companies 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.