Correlation Between Power Momentum and Ppm High

Can any of the company-specific risk be diversified away by investing in both Power Momentum and Ppm High 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 Power Momentum and Ppm High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Momentum Index and Ppm High Yield, you can compare the effects of market volatilities on Power Momentum and Ppm High 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 Power Momentum with a short position of Ppm High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Momentum and Ppm High.

Diversification Opportunities for Power Momentum and Ppm High

0.35

Correlation Coefficient

Power Momentum  Ppm High

Weak diversification

The 3 months correlation between Power and Ppm is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Power Momentum Index and Ppm High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ppm High Yield and Power Momentum 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 Power Momentum Index are associated (or correlated) with Ppm High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ppm High Yield has no effect on the direction of Power Momentum i.e., Power Momentum and Ppm High go up and down completely randomly.

Pair Corralation between Power Momentum and Ppm High

Assuming the 90 days horizon Power Momentum Index is expected to generate 3.42 times more return on investment than Ppm High. However, Power Momentum is 3.42 times more volatile than Ppm High Yield. It trades about 0.07 of its potential returns per unit of risk. Ppm High Yield is currently generating about 0.11 per unit of risk. If you would invest  1,038  in Power Momentum Index on October 4, 2024 and sell it today you would earn a total of  389.00  from holding Power Momentum Index or generate 37.48% return on investment over 90 days.

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

Power Momentum Index  vs.  Ppm High Yield

Power Momentum Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Momentum Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Power Momentum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ppm High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ppm High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ppm High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Power Momentum and Ppm High

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

The idea behind Power Momentum Index and Ppm High Yield 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.