Correlation Between Page Industries and Servotech Power

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

By analyzing existing cross correlation between Page Industries Limited and Servotech Power Systems, you can compare the effects of market volatilities on Page Industries and Servotech Power 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 Page Industries with a short position of Servotech Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Page Industries and Servotech Power.

Diversification Opportunities for Page Industries and Servotech Power

-0.12

Correlation Coefficient

Page Industries  Servotech Power

Good diversification

The 3 months correlation between Page and Servotech is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Page Industries Limited and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems and Page Industries 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 Page Industries Limited are associated (or correlated) with Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of Page Industries i.e., Page Industries and Servotech Power go up and down completely randomly.

Pair Corralation between Page Industries and Servotech Power

Assuming the 90 days trading horizon Page Industries Limited is expected to generate 0.63 times more return on investment than Servotech Power. However, Page Industries Limited is 1.59 times less risky than Servotech Power. It trades about 0.18 of its potential returns per unit of risk. Servotech Power Systems is currently generating about -0.13 per unit of risk. If you would invest  4,594,605  in Page Industries Limited on October 6, 2024 and sell it today you would earn a total of  199,515  from holding Page Industries Limited or generate 4.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Page Industries Limited  vs.  Servotech Power Systems

Page Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Page Industries Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Page Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Servotech Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Servotech Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Servotech Power is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Page Industries and Servotech Power

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

The idea behind Page Industries Limited and Servotech Power Systems 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.