Correlation Between Pan Pacific and PriceSmart

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

By analyzing existing cross correlation between Pan Pacific International and PriceSmart, you can compare the effects of market volatilities on Pan Pacific and PriceSmart 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 Pan Pacific with a short position of PriceSmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Pacific and PriceSmart.

Diversification Opportunities for Pan Pacific and PriceSmart

-0.1

Correlation Coefficient

Pan Pacific  PriceSmart

Good diversification

The 3 months correlation between Pan and PriceSmart is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pan Pacific International and PriceSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PriceSmart and Pan Pacific 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 Pan Pacific International are associated (or correlated) with PriceSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PriceSmart has no effect on the direction of Pan Pacific i.e., Pan Pacific and PriceSmart go up and down completely randomly.

Pair Corralation between Pan Pacific and PriceSmart

Assuming the 90 days horizon Pan Pacific International is expected to under-perform the PriceSmart. In addition to that, Pan Pacific is 1.05 times more volatile than PriceSmart. It trades about -0.03 of its total potential returns per unit of risk. PriceSmart is currently generating about 0.03 per unit of volatility. If you would invest  8,803  in PriceSmart on September 4, 2024 and sell it today you would earn a total of  207.00  from holding PriceSmart or generate 2.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Pan Pacific International  vs.  PriceSmart

Pan Pacific International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan Pacific International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Pan Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PriceSmart

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PriceSmart are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, PriceSmart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pan Pacific and PriceSmart

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

The idea behind Pan Pacific International and PriceSmart 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 Stocks Directory module to find actively traded stocks across global markets.