Correlation Between Associated Alcohols and PTC INDUSTRIES

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

By analyzing existing cross correlation between Associated Alcohols Breweries and PTC INDUSTRIES LTD, you can compare the effects of market volatilities on Associated Alcohols and PTC INDUSTRIES 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 Associated Alcohols with a short position of PTC INDUSTRIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Alcohols and PTC INDUSTRIES.

Diversification Opportunities for Associated Alcohols and PTC INDUSTRIES

0.28

Correlation Coefficient

Associated Alcohols  PTC INDUSTRIES

Modest diversification

The 3 months correlation between Associated and PTC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and PTC INDUSTRIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC INDUSTRIES LTD and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with PTC INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC INDUSTRIES LTD has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and PTC INDUSTRIES go up and down completely randomly.

Pair Corralation between Associated Alcohols and PTC INDUSTRIES

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 1.24 times more return on investment than PTC INDUSTRIES. However, Associated Alcohols is 1.24 times more volatile than PTC INDUSTRIES LTD. It trades about 0.04 of its potential returns per unit of risk. PTC INDUSTRIES LTD is currently generating about -0.02 per unit of risk. If you would invest  103,600  in Associated Alcohols Breweries on December 5, 2024 and sell it today you would earn a total of  4,010  from holding Associated Alcohols Breweries or generate 3.87% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  PTC INDUSTRIES LTD

Associated Alcohols

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Associated Alcohols may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PTC INDUSTRIES LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days PTC INDUSTRIES LTD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, PTC INDUSTRIES is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Associated Alcohols and PTC INDUSTRIES

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

The idea behind Associated Alcohols Breweries and PTC INDUSTRIES LTD 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.