Correlation Between Porvair Plc and Ajax Resources

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

By analyzing existing cross correlation between Porvair plc and Ajax Resources PLC, you can compare the effects of market volatilities on Porvair Plc and Ajax Resources 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 Porvair Plc with a short position of Ajax Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porvair Plc and Ajax Resources.

Diversification Opportunities for Porvair Plc and Ajax Resources

-0.04

Correlation Coefficient

Porvair Plc  Ajax Resources

Good diversification

The 3 months correlation between Porvair and Ajax is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Porvair plc and Ajax Resources PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ajax Resources PLC and Porvair Plc 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 Porvair plc are associated (or correlated) with Ajax Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ajax Resources PLC has no effect on the direction of Porvair Plc i.e., Porvair Plc and Ajax Resources go up and down completely randomly.

Pair Corralation between Porvair Plc and Ajax Resources

Assuming the 90 days trading horizon Porvair Plc is expected to generate 2.28 times less return on investment than Ajax Resources. In addition to that, Porvair Plc is 1.53 times more volatile than Ajax Resources PLC. It trades about 0.04 of its total potential returns per unit of risk. Ajax Resources PLC is currently generating about 0.12 per unit of volatility. If you would invest  275.00  in Ajax Resources PLC on September 18, 2024 and sell it today you would earn a total of  25.00  from holding Ajax Resources PLC or generate 9.09% return on investment over 90 days.

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

Porvair plc  vs.  Ajax Resources PLC

Porvair plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Porvair Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ajax Resources PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ajax Resources PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ajax Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Porvair Plc and Ajax Resources

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

The idea behind Porvair plc and Ajax Resources PLC 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.