Correlation Between CTS and Porvair Plc

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

By analyzing existing cross correlation between CTS Corporation and Porvair plc, you can compare the effects of market volatilities on CTS and Porvair Plc 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 CTS with a short position of Porvair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTS and Porvair Plc.

Diversification Opportunities for CTS and Porvair Plc

0.52

Correlation Coefficient

CTS  Porvair Plc

Very weak diversification

The 3 months correlation between CTS and Porvair is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc and CTS 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 CTS Corporation are associated (or correlated) with Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of CTS i.e., CTS and Porvair Plc go up and down completely randomly.

Pair Corralation between CTS and Porvair Plc

Considering the 90-day investment horizon CTS is expected to generate 1.1 times less return on investment than Porvair Plc. In addition to that, CTS is 2.4 times more volatile than Porvair plc. It trades about 0.04 of its total potential returns per unit of risk. Porvair plc is currently generating about 0.11 per unit of volatility. If you would invest  818.00  in Porvair plc on September 29, 2024 and sell it today you would earn a total of  102.00  from holding Porvair plc or generate 12.47% return on investment over 90 days.

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

CTS Corp.  vs.  Porvair plc

CTS Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Porvair plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Porvair Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CTS and Porvair Plc

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

The idea behind CTS Corporation and Porvair plc 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.