Correlation Between POT and Transport

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

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

Diversification Opportunities for POT and Transport

-0.22

Correlation Coefficient

POT  Transport

Very good diversification

The 3 months correlation between POT and Transport is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding PostTelecommunication Equipmen and Transport and Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport and Industry 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 Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport and Industry has no effect on the direction of POT i.e., POT and Transport go up and down completely randomly.

Pair Corralation between POT and Transport

Assuming the 90 days trading horizon PostTelecommunication Equipment is expected to generate 1.89 times more return on investment than Transport. However, POT is 1.89 times more volatile than Transport and Industry. It trades about 0.04 of its potential returns per unit of risk. Transport and Industry is currently generating about -0.36 per unit of risk. If you would invest  1,510,000  in PostTelecommunication Equipment on December 29, 2024 and sell it today you would earn a total of  40,000  from holding PostTelecommunication Equipment or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.88%
Values	Daily Returns

PostTelecommunication Equipmen  vs.  Transport and Industry

PostTelecommunication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PostTelecommunication Equipment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, POT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Transport and Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transport and Industry 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with POT and Transport

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

The idea behind PostTelecommunication Equipment and Transport and Industry 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.