Correlation Between Penta Ocean and Haier Smart

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

By analyzing existing cross correlation between Penta Ocean Construction Co and Haier Smart Home, you can compare the effects of market volatilities on Penta Ocean and Haier Smart 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 Penta Ocean with a short position of Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Haier Smart.

Diversification Opportunities for Penta Ocean and Haier Smart

0.6

Correlation Coefficient

Penta Ocean  Haier Smart

Poor diversification

The 3 months correlation between Penta and Haier is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Penta Ocean i.e., Penta Ocean and Haier Smart go up and down completely randomly.

Pair Corralation between Penta Ocean and Haier Smart

Assuming the 90 days horizon Penta Ocean Construction Co is expected to generate 1.51 times more return on investment than Haier Smart. However, Penta Ocean is 1.51 times more volatile than Haier Smart Home. It trades about 0.11 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.04 per unit of risk. If you would invest  385.00  in Penta Ocean Construction Co on December 28, 2024 and sell it today you would earn a total of  52.00  from holding Penta Ocean Construction Co or generate 13.51% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Haier Smart Home

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean reported solid returns over the last few months and may actually be approaching a breakup point.

Haier Smart Home

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Haier Smart is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Penta Ocean and Haier Smart

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

The idea behind Penta Ocean Construction Co and Haier Smart Home 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.