Correlation Between Pacific Ridge and Manhattan

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

By analyzing existing cross correlation between Pacific Ridge Exploration and Manhattan Limited, you can compare the effects of market volatilities on Pacific Ridge and Manhattan 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 Pacific Ridge with a short position of Manhattan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Ridge and Manhattan.

Diversification Opportunities for Pacific Ridge and Manhattan

0.0

Correlation Coefficient

Pacific Ridge  Manhattan

Pay attention - limited upside

The 3 months correlation between Pacific and Manhattan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Ridge Exploration and Manhattan Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manhattan Limited and Pacific Ridge 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 Pacific Ridge Exploration are associated (or correlated) with Manhattan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manhattan Limited has no effect on the direction of Pacific Ridge i.e., Pacific Ridge and Manhattan go up and down completely randomly.

Pair Corralation between Pacific Ridge and Manhattan

Assuming the 90 days horizon Pacific Ridge is expected to generate 1.43 times less return on investment than Manhattan. In addition to that, Pacific Ridge is 1.01 times more volatile than Manhattan Limited. It trades about 0.07 of its total potential returns per unit of risk. Manhattan Limited is currently generating about 0.1 per unit of volatility. If you would invest  0.48  in Manhattan Limited on September 13, 2024 and sell it today you would earn a total of  0.29  from holding Manhattan Limited or generate 60.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Pacific Ridge Exploration  vs.  Manhattan Limited

Pacific Ridge Exploration

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Ridge Exploration are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pacific Ridge reported solid returns over the last few months and may actually be approaching a breakup point.

Manhattan Limited

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Manhattan Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Manhattan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Ridge and Manhattan

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

The idea behind Pacific Ridge Exploration and Manhattan 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.