Correlation Between Pico Public and President Automobile

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

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

Diversification Opportunities for Pico Public and President Automobile

0.32

Correlation Coefficient

Pico Public  President Automobile

Weak diversification

The 3 months correlation between Pico and President is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pico Public and President Automobile Industrie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Automobile and Pico Public 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 Pico Public are associated (or correlated) with President Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Automobile has no effect on the direction of Pico Public i.e., Pico Public and President Automobile go up and down completely randomly.

Pair Corralation between Pico Public and President Automobile

Assuming the 90 days trading horizon Pico Public is expected to generate 1.13 times less return on investment than President Automobile. In addition to that, Pico Public is 1.22 times more volatile than President Automobile Industries. It trades about 0.21 of its total potential returns per unit of risk. President Automobile Industries is currently generating about 0.29 per unit of volatility. If you would invest  132.00  in President Automobile Industries on December 4, 2024 and sell it today you would earn a total of  11.00  from holding President Automobile Industries or generate 8.33% return on investment over 90 days.

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

Pico Public  vs.  President Automobile Industrie

Pico Public

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pico Public are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pico Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

President Automobile

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in President Automobile Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, President Automobile may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pico Public and President Automobile

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

The idea behind Pico Public and President Automobile Industries 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.