Correlation Between Hammer Metals and Pact Group

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

By analyzing existing cross correlation between Hammer Metals and Pact Group Holdings, you can compare the effects of market volatilities on Hammer Metals and Pact Group 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 Hammer Metals with a short position of Pact Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hammer Metals and Pact Group.

Diversification Opportunities for Hammer Metals and Pact Group

-0.46

Correlation Coefficient

Hammer Metals  Pact Group

Very good diversification

The 3 months correlation between Hammer and Pact is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hammer Metals and Pact Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pact Group Holdings and Hammer Metals 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 Hammer Metals are associated (or correlated) with Pact Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pact Group Holdings has no effect on the direction of Hammer Metals i.e., Hammer Metals and Pact Group go up and down completely randomly.

Pair Corralation between Hammer Metals and Pact Group

Assuming the 90 days trading horizon Hammer Metals is expected to generate 15.77 times less return on investment than Pact Group. In addition to that, Hammer Metals is 1.29 times more volatile than Pact Group Holdings. It trades about 0.01 of its total potential returns per unit of risk. Pact Group Holdings is currently generating about 0.19 per unit of volatility. If you would invest  81.00  in Pact Group Holdings on December 21, 2024 and sell it today you would earn a total of  34.00  from holding Pact Group Holdings or generate 41.98% return on investment over 90 days.

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

Hammer Metals  vs.  Pact Group Holdings

Hammer Metals

Risk-Adjusted Performance

Very Weak

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

Pact Group Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pact Group Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Pact Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hammer Metals and Pact Group

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

The idea behind Hammer Metals and Pact Group Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.