Correlation Between Platinum Asia and EROAD

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

By analyzing existing cross correlation between Platinum Asia Investments and EROAD, you can compare the effects of market volatilities on Platinum Asia and EROAD 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 Platinum Asia with a short position of EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Platinum Asia and EROAD.

Diversification Opportunities for Platinum Asia and EROAD

-0.41

Correlation Coefficient

Platinum Asia  EROAD

Very good diversification

The 3 months correlation between Platinum and EROAD is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Platinum Asia Investments and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Platinum Asia 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 Platinum Asia Investments are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Platinum Asia i.e., Platinum Asia and EROAD go up and down completely randomly.

Pair Corralation between Platinum Asia and EROAD

Assuming the 90 days trading horizon Platinum Asia is expected to generate 2.5 times less return on investment than EROAD. But when comparing it to its historical volatility, Platinum Asia Investments is 2.08 times less risky than EROAD. It trades about 0.13 of its potential returns per unit of risk. EROAD is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  80.00  in EROAD on September 19, 2024 and sell it today you would earn a total of  6.00  from holding EROAD or generate 7.5% return on investment over 90 days.

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

Platinum Asia Investments  vs.  EROAD

Platinum Asia Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum Asia Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Platinum Asia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Platinum Asia and EROAD

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

The idea behind Platinum Asia Investments and EROAD 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.