Correlation Between REVO INSURANCE and Penta-Ocean Construction

Can any of the company-specific risk be diversified away by investing in both REVO INSURANCE 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 REVO INSURANCE 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 REVO INSURANCE SPA and Penta Ocean Construction Co, you can compare the effects of market volatilities on REVO INSURANCE 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 REVO INSURANCE with a short position of Penta-Ocean Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of REVO INSURANCE and Penta-Ocean Construction.

Diversification Opportunities for REVO INSURANCE and Penta-Ocean Construction

-0.54

Correlation Coefficient

REVO INSURANCE  Penta-Ocean Construction

Excellent diversification

The 3 months correlation between REVO and Penta-Ocean is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding REVO INSURANCE SPA 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 REVO INSURANCE 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 REVO INSURANCE SPA 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 REVO INSURANCE i.e., REVO INSURANCE and Penta-Ocean Construction go up and down completely randomly.

Pair Corralation between REVO INSURANCE and Penta-Ocean Construction

Assuming the 90 days horizon REVO INSURANCE SPA is expected to generate 0.83 times more return on investment than Penta-Ocean Construction. However, REVO INSURANCE SPA is 1.21 times less risky than Penta-Ocean Construction. It trades about 0.21 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about -0.03 per unit of risk. If you would invest  928.00  in REVO INSURANCE SPA on September 3, 2024 and sell it today you would earn a total of  152.00  from holding REVO INSURANCE SPA or generate 16.38% return on investment over 90 days.

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

REVO INSURANCE SPA  vs.  Penta Ocean Construction Co

REVO INSURANCE SPA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

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 REVO INSURANCE and Penta-Ocean Construction

The main advantage of trading using opposite REVO INSURANCE and Penta-Ocean Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REVO INSURANCE 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 REVO INSURANCE SPA 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.