Correlation Between Phol Dhanya and Panjawattana Plastic

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

By analyzing existing cross correlation between Phol Dhanya Public and Panjawattana Plastic Public, you can compare the effects of market volatilities on Phol Dhanya and Panjawattana Plastic 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 Phol Dhanya with a short position of Panjawattana Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phol Dhanya and Panjawattana Plastic.

Diversification Opportunities for Phol Dhanya and Panjawattana Plastic

0.75

Correlation Coefficient

Phol Dhanya  Panjawattana Plastic

Poor diversification

The 3 months correlation between Phol and Panjawattana is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Phol Dhanya Public and Panjawattana Plastic Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panjawattana Plastic and Phol Dhanya 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 Phol Dhanya Public are associated (or correlated) with Panjawattana Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panjawattana Plastic has no effect on the direction of Phol Dhanya i.e., Phol Dhanya and Panjawattana Plastic go up and down completely randomly.

Pair Corralation between Phol Dhanya and Panjawattana Plastic

Assuming the 90 days trading horizon Phol Dhanya Public is expected to generate 0.32 times more return on investment than Panjawattana Plastic. However, Phol Dhanya Public is 3.1 times less risky than Panjawattana Plastic. It trades about -0.04 of its potential returns per unit of risk. Panjawattana Plastic Public is currently generating about -0.21 per unit of risk. If you would invest  306.00  in Phol Dhanya Public on September 14, 2024 and sell it today you would lose (2.00) from holding Phol Dhanya Public or give up 0.65% of portfolio value over 90 days.

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

Phol Dhanya Public  vs.  Panjawattana Plastic Public

Phol Dhanya Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phol Dhanya Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Phol Dhanya is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Panjawattana Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Panjawattana Plastic Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Phol Dhanya and Panjawattana Plastic

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

The idea behind Phol Dhanya Public and Panjawattana Plastic Public 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.