Correlation Between Pact Group and Advanced Braking

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

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

Diversification Opportunities for Pact Group and Advanced Braking

-0.04

Correlation Coefficient

Pact Group  Advanced Braking

Good diversification

The 3 months correlation between Pact and Advanced is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pact Group Holdings and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and Pact Group 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 Pact Group Holdings are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of Pact Group i.e., Pact Group and Advanced Braking go up and down completely randomly.

Pair Corralation between Pact Group and Advanced Braking

Assuming the 90 days trading horizon Pact Group Holdings is expected to generate 1.25 times more return on investment than Advanced Braking. However, Pact Group is 1.25 times more volatile than Advanced Braking Technology. It trades about 0.18 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.0 per unit of risk. If you would invest  82.00  in Pact Group Holdings on December 27, 2024 and sell it today you would earn a total of  33.00  from holding Pact Group Holdings or generate 40.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Pact Group Holdings  vs.  Advanced Braking Technology

Pact Group Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pact Group Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Pact Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Advanced Braking Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Braking Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Advanced Braking is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pact Group and Advanced Braking

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

The idea behind Pact Group Holdings and Advanced Braking 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.