Correlation Between Ecofibre and PM Capital

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

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

Diversification Opportunities for Ecofibre and PM Capital

0.58

Correlation Coefficient

Ecofibre  PM Capital

Very weak diversification

The 3 months correlation between Ecofibre and PGF is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and PM Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PM Capital Global and Ecofibre 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 Ecofibre are associated (or correlated) with PM Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PM Capital Global has no effect on the direction of Ecofibre i.e., Ecofibre and PM Capital go up and down completely randomly.

Pair Corralation between Ecofibre and PM Capital

Assuming the 90 days trading horizon Ecofibre is expected to under-perform the PM Capital. In addition to that, Ecofibre is 6.41 times more volatile than PM Capital Global. It trades about -0.02 of its total potential returns per unit of risk. PM Capital Global is currently generating about -0.01 per unit of volatility. If you would invest  227.00  in PM Capital Global on October 9, 2024 and sell it today you would lose (2.00) from holding PM Capital Global or give up 0.88% of portfolio value over 90 days.

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

Ecofibre  vs.  PM Capital Global

Ecofibre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecofibre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

PM Capital Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PM Capital Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, PM Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecofibre and PM Capital

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

The idea behind Ecofibre and PM Capital Global 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..