Correlation Between Premier Investments and State Gas

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

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

Diversification Opportunities for Premier Investments and State Gas

0.11

Correlation Coefficient

Premier Investments  State Gas

Average diversification

The 3 months correlation between Premier and State is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Premier Investments and State Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Gas and Premier Investments 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 Premier Investments are associated (or correlated) with State Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Gas has no effect on the direction of Premier Investments i.e., Premier Investments and State Gas go up and down completely randomly.

Pair Corralation between Premier Investments and State Gas

Assuming the 90 days trading horizon Premier Investments is expected to generate 0.44 times more return on investment than State Gas. However, Premier Investments is 2.3 times less risky than State Gas. It trades about -0.03 of its potential returns per unit of risk. State Gas is currently generating about -0.02 per unit of risk. If you would invest  3,057  in Premier Investments on October 21, 2024 and sell it today you would lose (215.00) from holding Premier Investments or give up 7.03% of portfolio value over 90 days.

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

Premier Investments  vs.  State Gas

Premier Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

State Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Premier Investments and State Gas

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

The idea behind Premier Investments and State Gas 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.