Correlation Between Penta Ocean and Tokyu Construction

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

Diversification Opportunities for Penta Ocean and Tokyu Construction

0.7

Correlation Coefficient

Penta Ocean  Tokyu Construction

Poor diversification

The 3 months correlation between Penta and Tokyu is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction 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 Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of Penta Ocean i.e., Penta Ocean and Tokyu Construction go up and down completely randomly.

Pair Corralation between Penta Ocean and Tokyu Construction

Assuming the 90 days horizon Penta Ocean Construction Co is expected to under-perform the Tokyu Construction. In addition to that, Penta Ocean is 1.5 times more volatile than Tokyu Construction Co. It trades about -0.01 of its total potential returns per unit of risk. Tokyu Construction Co is currently generating about 0.0 per unit of volatility. If you would invest  428.00  in Tokyu Construction Co on October 5, 2024 and sell it today you would lose (2.00) from holding Tokyu Construction Co or give up 0.47% of portfolio value over 90 days.

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

Penta Ocean Construction Co  vs.  Tokyu Construction Co

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.

Tokyu Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Penta Ocean and Tokyu Construction

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

The idea behind Penta Ocean Construction Co and Tokyu Construction Co 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 Anywhere module to track or share privately all of your investments from the convenience of any device.