Correlation Between Credo Brands and Premier Polyfilm

Can any of the company-specific risk be diversified away by investing in both Credo Brands and Premier Polyfilm 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 Credo Brands and Premier Polyfilm into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Credo Brands Marketing and Premier Polyfilm Limited, you can compare the effects of market volatilities on Credo Brands and Premier Polyfilm 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 Credo Brands with a short position of Premier Polyfilm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credo Brands and Premier Polyfilm.

Diversification Opportunities for Credo Brands and Premier Polyfilm

0.13

Correlation Coefficient

Credo Brands  Premier Polyfilm

Average diversification

The 3 months correlation between Credo and Premier is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Credo Brands Marketing and Premier Polyfilm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Polyfilm and Credo Brands 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 Credo Brands Marketing are associated (or correlated) with Premier Polyfilm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Polyfilm has no effect on the direction of Credo Brands i.e., Credo Brands and Premier Polyfilm go up and down completely randomly.

Pair Corralation between Credo Brands and Premier Polyfilm

Assuming the 90 days trading horizon Credo Brands Marketing is expected to under-perform the Premier Polyfilm. But the stock apears to be less risky and, when comparing its historical volatility, Credo Brands Marketing is 1.24 times less risky than Premier Polyfilm. The stock trades about -0.05 of its potential returns per unit of risk. The Premier Polyfilm Limited is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  5,990  in Premier Polyfilm Limited on October 6, 2024 and sell it today you would earn a total of  2,526  from holding Premier Polyfilm Limited or generate 42.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Credo Brands Marketing  vs.  Premier Polyfilm Limited

Credo Brands Marketing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credo Brands Marketing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Credo Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Premier Polyfilm

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Polyfilm Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Premier Polyfilm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Credo Brands and Premier Polyfilm

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

The idea behind Credo Brands Marketing and Premier Polyfilm Limited 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.