Correlation Between Premier Polyfilm and Generic Engineering

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

By analyzing existing cross correlation between Premier Polyfilm Limited and Generic Engineering Construction, you can compare the effects of market volatilities on Premier Polyfilm and Generic Engineering 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 Premier Polyfilm with a short position of Generic Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Polyfilm and Generic Engineering.

Diversification Opportunities for Premier Polyfilm and Generic Engineering

0.24

Correlation Coefficient

Premier Polyfilm  Generic Engineering

Modest diversification

The 3 months correlation between Premier and Generic is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Premier Polyfilm Limited and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering and Premier Polyfilm 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 Premier Polyfilm Limited are associated (or correlated) with Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Premier Polyfilm i.e., Premier Polyfilm and Generic Engineering go up and down completely randomly.

Pair Corralation between Premier Polyfilm and Generic Engineering

Assuming the 90 days trading horizon Premier Polyfilm Limited is expected to generate 1.21 times more return on investment than Generic Engineering. However, Premier Polyfilm is 1.21 times more volatile than Generic Engineering Construction. It trades about 0.09 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about -0.01 per unit of risk. If you would invest  1,920  in Premier Polyfilm Limited on October 23, 2024 and sell it today you would earn a total of  4,895  from holding Premier Polyfilm Limited or generate 254.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.38%
Values	Daily Returns

Premier Polyfilm Limited  vs.  Generic Engineering Constructi

Premier Polyfilm

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Polyfilm Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Premier Polyfilm reported solid returns over the last few months and may actually be approaching a breakup point.

Generic Engineering

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Generic Engineering is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Premier Polyfilm and Generic Engineering

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

The idea behind Premier Polyfilm Limited and Generic Engineering Construction 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.