Correlation Between Commercial Vehicle and Penta-Ocean Construction

Can any of the company-specific risk be diversified away by investing in both Commercial Vehicle and Penta-Ocean Construction 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 Commercial Vehicle and Penta-Ocean Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Commercial Vehicle Group and Penta Ocean Construction Co, you can compare the effects of market volatilities on Commercial Vehicle and Penta-Ocean Construction 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 Commercial Vehicle with a short position of Penta-Ocean Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Vehicle and Penta-Ocean Construction.

Diversification Opportunities for Commercial Vehicle and Penta-Ocean Construction

0.49

Correlation Coefficient

Commercial Vehicle  Penta-Ocean Construction

Very weak diversification

The 3 months correlation between Commercial and Penta-Ocean is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Vehicle Group and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta-Ocean Construction and Commercial Vehicle 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 Commercial Vehicle Group are associated (or correlated) with Penta-Ocean Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta-Ocean Construction has no effect on the direction of Commercial Vehicle i.e., Commercial Vehicle and Penta-Ocean Construction go up and down completely randomly.

Pair Corralation between Commercial Vehicle and Penta-Ocean Construction

Assuming the 90 days trading horizon Commercial Vehicle Group is expected to under-perform the Penta-Ocean Construction. In addition to that, Commercial Vehicle is 2.28 times more volatile than Penta Ocean Construction Co. It trades about -0.13 of its total potential returns per unit of risk. Penta Ocean Construction Co is currently generating about -0.03 per unit of volatility. If you would invest  390.00  in Penta Ocean Construction Co on September 4, 2024 and sell it today you would lose (14.00) from holding Penta Ocean Construction Co or give up 3.59% of portfolio value over 90 days.

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

Commercial Vehicle Group  vs.  Penta Ocean Construction Co

Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commercial Vehicle Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Penta-Ocean Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta-Ocean Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Commercial Vehicle and Penta-Ocean Construction

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

The idea behind Commercial Vehicle Group and Penta Ocean Construction Co 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.