Correlation Between PPG Industries and Graphene Manufacturing

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

By analyzing existing cross correlation between PPG Industries and Graphene Manufacturing Group, you can compare the effects of market volatilities on PPG Industries and Graphene Manufacturing 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 PPG Industries with a short position of Graphene Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPG Industries and Graphene Manufacturing.

Diversification Opportunities for PPG Industries and Graphene Manufacturing

-0.32

Correlation Coefficient

PPG Industries  Graphene Manufacturing

Very good diversification

The 3 months correlation between PPG and Graphene is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding PPG Industries and Graphene Manufacturing Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphene Manufacturing and PPG Industries 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 PPG Industries are associated (or correlated) with Graphene Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphene Manufacturing has no effect on the direction of PPG Industries i.e., PPG Industries and Graphene Manufacturing go up and down completely randomly.

Pair Corralation between PPG Industries and Graphene Manufacturing

Considering the 90-day investment horizon PPG Industries is expected to under-perform the Graphene Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, PPG Industries is 4.17 times less risky than Graphene Manufacturing. The stock trades about -0.09 of its potential returns per unit of risk. The Graphene Manufacturing Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Graphene Manufacturing Group on December 27, 2024 and sell it today you would earn a total of  1.00  from holding Graphene Manufacturing Group or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

PPG Industries  vs.  Graphene Manufacturing Group

PPG Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Graphene Manufacturing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphene Manufacturing Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Graphene Manufacturing reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PPG Industries and Graphene Manufacturing

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

The idea behind PPG Industries and Graphene Manufacturing Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.