Correlation Between Pennexx Foods and Dear Cashmere

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

By analyzing existing cross correlation between Pennexx Foods and Dear Cashmere Holding, you can compare the effects of market volatilities on Pennexx Foods and Dear Cashmere 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 Pennexx Foods with a short position of Dear Cashmere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pennexx Foods and Dear Cashmere.

Diversification Opportunities for Pennexx Foods and Dear Cashmere

0.12

Correlation Coefficient

Pennexx Foods  Dear Cashmere

Average diversification

The 3 months correlation between Pennexx and Dear is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pennexx Foods and Dear Cashmere Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dear Cashmere Holding and Pennexx Foods 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 Pennexx Foods are associated (or correlated) with Dear Cashmere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dear Cashmere Holding has no effect on the direction of Pennexx Foods i.e., Pennexx Foods and Dear Cashmere go up and down completely randomly.

Pair Corralation between Pennexx Foods and Dear Cashmere

Given the investment horizon of 90 days Pennexx Foods is expected to generate 1.26 times more return on investment than Dear Cashmere. However, Pennexx Foods is 1.26 times more volatile than Dear Cashmere Holding. It trades about -0.01 of its potential returns per unit of risk. Dear Cashmere Holding is currently generating about -0.02 per unit of risk. If you would invest  2.30  in Pennexx Foods on October 11, 2024 and sell it today you would lose (0.90) from holding Pennexx Foods or give up 39.13% of portfolio value over 90 days.

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

Pennexx Foods  vs.  Dear Cashmere Holding

Pennexx Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pennexx Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Pennexx Foods is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Dear Cashmere Holding

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dear Cashmere Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Pennexx Foods and Dear Cashmere

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

The idea behind Pennexx Foods and Dear Cashmere Holding 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.