Correlation Between Penta Ocean and Columbia Sportswear

Can any of the company-specific risk be diversified away by investing in both Penta Ocean and Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear, you can compare the effects of market volatilities on Penta Ocean and Columbia Sportswear 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 Columbia Sportswear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Columbia Sportswear.

Diversification Opportunities for Penta Ocean and Columbia Sportswear

-0.02

Correlation Coefficient

Penta Ocean  Columbia Sportswear

Good diversification

The 3 months correlation between Penta and Columbia is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Penta Ocean i.e., Penta Ocean and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Penta Ocean and Columbia Sportswear

Assuming the 90 days horizon Penta Ocean Construction Co is expected to under-perform the Columbia Sportswear. But the stock apears to be less risky and, when comparing its historical volatility, Penta Ocean Construction Co is 1.32 times less risky than Columbia Sportswear. The stock trades about -0.01 of its potential returns per unit of risk. The Columbia Sportswear is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,421  in Columbia Sportswear on October 5, 2024 and sell it today you would earn a total of  729.00  from holding Columbia Sportswear or generate 9.82% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Columbia Sportswear

Penta Ocean Construc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Columbia Sportswear

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Columbia Sportswear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Columbia Sportswear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Penta Ocean and Columbia Sportswear

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

The idea behind Penta Ocean Construction Co and Columbia Sportswear 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.