Correlation Between Mena Transport and PMC LABEL

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

By analyzing existing cross correlation between Mena Transport Public and PMC LABEL MATERIALS, you can compare the effects of market volatilities on Mena Transport and PMC LABEL 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 Mena Transport with a short position of PMC LABEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mena Transport and PMC LABEL.

Diversification Opportunities for Mena Transport and PMC LABEL

0.51

Correlation Coefficient

Mena Transport  PMC LABEL

Very weak diversification

The 3 months correlation between Mena and PMC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mena Transport Public and PMC LABEL MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMC LABEL MATERIALS and Mena Transport 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 Mena Transport Public are associated (or correlated) with PMC LABEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMC LABEL MATERIALS has no effect on the direction of Mena Transport i.e., Mena Transport and PMC LABEL go up and down completely randomly.

Pair Corralation between Mena Transport and PMC LABEL

Assuming the 90 days trading horizon Mena Transport is expected to generate 2.24 times less return on investment than PMC LABEL. But when comparing it to its historical volatility, Mena Transport Public is 1.5 times less risky than PMC LABEL. It trades about 0.03 of its potential returns per unit of risk. PMC LABEL MATERIALS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  109.00  in PMC LABEL MATERIALS on September 13, 2024 and sell it today you would earn a total of  2.00  from holding PMC LABEL MATERIALS or generate 1.83% return on investment over 90 days.

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

Mena Transport Public  vs.  PMC LABEL MATERIALS

Mena Transport Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mena Transport Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mena Transport is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

PMC LABEL MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PMC LABEL MATERIALS 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 fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Mena Transport and PMC LABEL

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

The idea behind Mena Transport Public and PMC LABEL MATERIALS 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.