Correlation Between Holiday Entertainment and Penpower Technology

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

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

Diversification Opportunities for Holiday Entertainment and Penpower Technology

-0.4

Correlation Coefficient

Holiday Entertainment  Penpower Technology

Very good diversification

The 3 months correlation between Holiday and Penpower is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Entertainment Co and Penpower Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penpower Technology and Holiday Entertainment 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 Holiday Entertainment Co are associated (or correlated) with Penpower Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penpower Technology has no effect on the direction of Holiday Entertainment i.e., Holiday Entertainment and Penpower Technology go up and down completely randomly.

Pair Corralation between Holiday Entertainment and Penpower Technology

Assuming the 90 days trading horizon Holiday Entertainment is expected to generate 1.85 times less return on investment than Penpower Technology. But when comparing it to its historical volatility, Holiday Entertainment Co is 1.97 times less risky than Penpower Technology. It trades about 0.04 of its potential returns per unit of risk. Penpower Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,861  in Penpower Technology on September 27, 2024 and sell it today you would earn a total of  799.00  from holding Penpower Technology or generate 42.93% return on investment over 90 days.

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

Holiday Entertainment Co  vs.  Penpower Technology

Holiday Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Penpower Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penpower Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Penpower Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Holiday Entertainment and Penpower Technology

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

The idea behind Holiday Entertainment Co and Penpower Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..