Correlation Between Pato Chemical and Advanced Information

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

By analyzing existing cross correlation between Pato Chemical Industry and Advanced Information Technology, you can compare the effects of market volatilities on Pato Chemical and Advanced Information 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 Pato Chemical with a short position of Advanced Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pato Chemical and Advanced Information.

Diversification Opportunities for Pato Chemical and Advanced Information

-0.1

Correlation Coefficient

Pato Chemical  Advanced Information

Good diversification

The 3 months correlation between Pato and Advanced is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pato Chemical Industry and Advanced Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Information and Pato Chemical 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 Pato Chemical Industry are associated (or correlated) with Advanced Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Information has no effect on the direction of Pato Chemical i.e., Pato Chemical and Advanced Information go up and down completely randomly.

Pair Corralation between Pato Chemical and Advanced Information

Assuming the 90 days trading horizon Pato Chemical Industry is expected to generate 0.66 times more return on investment than Advanced Information. However, Pato Chemical Industry is 1.51 times less risky than Advanced Information. It trades about -0.03 of its potential returns per unit of risk. Advanced Information Technology is currently generating about -0.18 per unit of risk. If you would invest  840.00  in Pato Chemical Industry on October 11, 2024 and sell it today you would lose (5.00) from holding Pato Chemical Industry or give up 0.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Pato Chemical Industry  vs.  Advanced Information Technolog

Pato Chemical Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pato Chemical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Advanced Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Pato Chemical and Advanced Information

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

The idea behind Pato Chemical Industry and Advanced Information Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.