Correlation Between Ppm High and Pro Blend

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

By analyzing existing cross correlation between Ppm High Yield and Pro Blend Extended Term, you can compare the effects of market volatilities on Ppm High and Pro Blend 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 Ppm High with a short position of Pro Blend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ppm High and Pro Blend.

Diversification Opportunities for Ppm High and Pro Blend

-0.15

Correlation Coefficient

Ppm High  Pro Blend

Good diversification

The 3 months correlation between Ppm and Pro is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ppm High Yield and Pro Blend Extended Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Blend Extended and Ppm High 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 Ppm High Yield are associated (or correlated) with Pro Blend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Blend Extended has no effect on the direction of Ppm High i.e., Ppm High and Pro Blend go up and down completely randomly.

Pair Corralation between Ppm High and Pro Blend

Assuming the 90 days horizon Ppm High Yield is expected to under-perform the Pro Blend. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ppm High Yield is 2.47 times less risky than Pro Blend. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Pro Blend Extended Term is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,041  in Pro Blend Extended Term on September 13, 2024 and sell it today you would earn a total of  32.00  from holding Pro Blend Extended Term or generate 1.57% return on investment over 90 days.

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

Ppm High Yield  vs.  Pro Blend Extended Term

Ppm High Yield

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ppm High Yield are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ppm High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pro Blend Extended

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Blend Extended Term are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pro Blend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ppm High and Pro Blend

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

The idea behind Ppm High Yield and Pro Blend Extended Term 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.