Correlation Between POT and Post

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

By analyzing existing cross correlation between PostTelecommunication Equipment and Post and Telecommunications, you can compare the effects of market volatilities on POT and Post 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 POT with a short position of Post. Check out your portfolio center. Please also check ongoing floating volatility patterns of POT and Post.

Diversification Opportunities for POT and Post

-0.58

Correlation Coefficient

POT  Post

Excellent diversification

The 3 months correlation between POT and Post is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding PostTelecommunication Equipmen and Post and Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post and Telecommuni and POT 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 PostTelecommunication Equipment are associated (or correlated) with Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post and Telecommuni has no effect on the direction of POT i.e., POT and Post go up and down completely randomly.

Pair Corralation between POT and Post

Assuming the 90 days trading horizon PostTelecommunication Equipment is expected to under-perform the Post. In addition to that, POT is 2.2 times more volatile than Post and Telecommunications. It trades about -0.07 of its total potential returns per unit of risk. Post and Telecommunications is currently generating about -0.05 per unit of volatility. If you would invest  500,000  in Post and Telecommunications on September 15, 2024 and sell it today you would lose (43,000) from holding Post and Telecommunications or give up 8.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	60.0%
Values	Daily Returns

PostTelecommunication Equipmen  vs.  Post and Telecommunications

PostTelecommunication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PostTelecommunication Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Post and Telecommuni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Post and Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with POT and Post

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

The idea behind PostTelecommunication Equipment and Post and Telecommunications 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.