Correlation Between Plandai Biotech and XCana Petroleum

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

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

Diversification Opportunities for Plandai Biotech and XCana Petroleum

-0.06

Correlation Coefficient

Plandai Biotech  XCana Petroleum

Good diversification

The 3 months correlation between Plandai and XCana is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Plandai Biotech and XCana Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCana Petroleum and Plandai Biotech 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 Plandai Biotech are associated (or correlated) with XCana Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCana Petroleum has no effect on the direction of Plandai Biotech i.e., Plandai Biotech and XCana Petroleum go up and down completely randomly.

Pair Corralation between Plandai Biotech and XCana Petroleum

Given the investment horizon of 90 days Plandai Biotech is expected to generate 1.37 times more return on investment than XCana Petroleum. However, Plandai Biotech is 1.37 times more volatile than XCana Petroleum. It trades about 0.15 of its potential returns per unit of risk. XCana Petroleum is currently generating about 0.08 per unit of risk. If you would invest  0.02  in Plandai Biotech on October 3, 2024 and sell it today you would lose (0.01) from holding Plandai Biotech or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.26%
Values	Daily Returns

Plandai Biotech  vs.  XCana Petroleum

Plandai Biotech

Risk-Adjusted Performance

14 of 100

Good

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

XCana Petroleum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XCana Petroleum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, XCana Petroleum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plandai Biotech and XCana Petroleum

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

The idea behind Plandai Biotech and XCana Petroleum 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.