Correlation Between Peninsula and Michman Basad

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

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

Diversification Opportunities for Peninsula and Michman Basad

0.93

Correlation Coefficient

Peninsula  Michman Basad

Almost no diversification

The 3 months correlation between Peninsula and Michman is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Peninsula Group and Michman Basad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Michman Basad and Peninsula 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 Peninsula Group are associated (or correlated) with Michman Basad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Michman Basad has no effect on the direction of Peninsula i.e., Peninsula and Michman Basad go up and down completely randomly.

Pair Corralation between Peninsula and Michman Basad

Assuming the 90 days trading horizon Peninsula Group is expected to generate 1.66 times more return on investment than Michman Basad. However, Peninsula is 1.66 times more volatile than Michman Basad. It trades about 0.07 of its potential returns per unit of risk. Michman Basad is currently generating about 0.08 per unit of risk. If you would invest  13,413  in Peninsula Group on October 11, 2024 and sell it today you would earn a total of  8,377  from holding Peninsula Group or generate 62.45% return on investment over 90 days.

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

Peninsula Group  vs.  Michman Basad

Peninsula Group

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Peninsula Group are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Peninsula sustained solid returns over the last few months and may actually be approaching a breakup point.

Michman Basad

Risk-Adjusted Performance

46 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Michman Basad are ranked lower than 46 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Michman Basad sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peninsula and Michman Basad

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

The idea behind Peninsula Group and Michman Basad 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.