Correlation Between Grays Leasing and Pak Datacom

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

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

Diversification Opportunities for Grays Leasing and Pak Datacom

0.82

Correlation Coefficient

Grays Leasing  Pak Datacom

Very poor diversification

The 3 months correlation between Grays and Pak is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Grays Leasing and Pak Datacom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pak Datacom and Grays Leasing 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 Grays Leasing are associated (or correlated) with Pak Datacom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pak Datacom has no effect on the direction of Grays Leasing i.e., Grays Leasing and Pak Datacom go up and down completely randomly.

Pair Corralation between Grays Leasing and Pak Datacom

Assuming the 90 days trading horizon Grays Leasing is expected to under-perform the Pak Datacom. But the stock apears to be less risky and, when comparing its historical volatility, Grays Leasing is 1.08 times less risky than Pak Datacom. The stock trades about -0.14 of its potential returns per unit of risk. The Pak Datacom is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  13,834  in Pak Datacom on December 21, 2024 and sell it today you would lose (3,838) from holding Pak Datacom or give up 27.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.25%
Values	Daily Returns

Grays Leasing  vs.  Pak Datacom

Grays Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grays Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pak Datacom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pak Datacom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Grays Leasing and Pak Datacom

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

The idea behind Grays Leasing and Pak Datacom 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.