Correlation Between Pentagon I and Cannara Biotech

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

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

Diversification Opportunities for Pentagon I and Cannara Biotech

-0.49

Correlation Coefficient

Pentagon I  Cannara Biotech

Very good diversification

The 3 months correlation between Pentagon and Cannara is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital and Cannara Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannara Biotech and Pentagon I 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 Pentagon I Capital are associated (or correlated) with Cannara Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannara Biotech has no effect on the direction of Pentagon I i.e., Pentagon I and Cannara Biotech go up and down completely randomly.

Pair Corralation between Pentagon I and Cannara Biotech

Assuming the 90 days trading horizon Pentagon I Capital is expected to under-perform the Cannara Biotech. In addition to that, Pentagon I is 1.84 times more volatile than Cannara Biotech. It trades about -0.16 of its total potential returns per unit of risk. Cannara Biotech is currently generating about 0.1 per unit of volatility. If you would invest  67.00  in Cannara Biotech on September 21, 2024 and sell it today you would earn a total of  8.00  from holding Cannara Biotech or generate 11.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Pentagon I Capital  vs.  Cannara Biotech

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cannara Biotech

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Pentagon I and Cannara Biotech

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

The idea behind Pentagon I Capital and Cannara Biotech 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.