Correlation Between Planet Labs and Servotronics

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

By analyzing existing cross correlation between Planet Labs PBC and Servotronics, you can compare the effects of market volatilities on Planet Labs and Servotronics 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 Planet Labs with a short position of Servotronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Labs and Servotronics.

Diversification Opportunities for Planet Labs and Servotronics

0.08

Correlation Coefficient

Planet Labs  Servotronics

Significant diversification

The 3 months correlation between Planet and Servotronics is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Planet Labs PBC and Servotronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotronics and Planet Labs 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 Planet Labs PBC are associated (or correlated) with Servotronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotronics has no effect on the direction of Planet Labs i.e., Planet Labs and Servotronics go up and down completely randomly.

Pair Corralation between Planet Labs and Servotronics

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to under-perform the Servotronics. In addition to that, Planet Labs is 1.96 times more volatile than Servotronics. It trades about -0.02 of its total potential returns per unit of risk. Servotronics is currently generating about -0.02 per unit of volatility. If you would invest  1,109  in Servotronics on December 30, 2024 and sell it today you would lose (64.00) from holding Servotronics or give up 5.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Planet Labs PBC  vs.  Servotronics

Planet Labs PBC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Planet Labs PBC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Servotronics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Planet Labs and Servotronics

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

The idea behind Planet Labs PBC and Servotronics 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.