Correlation Between PriceSmart and Pan Pacific

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

By analyzing existing cross correlation between PriceSmart and Pan Pacific International, you can compare the effects of market volatilities on PriceSmart and Pan Pacific 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 PriceSmart with a short position of Pan Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of PriceSmart and Pan Pacific.

Diversification Opportunities for PriceSmart and Pan Pacific

0.21

Correlation Coefficient

PriceSmart  Pan Pacific

Modest diversification

The 3 months correlation between PriceSmart and Pan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PriceSmart and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International and PriceSmart 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 PriceSmart are associated (or correlated) with Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of PriceSmart i.e., PriceSmart and Pan Pacific go up and down completely randomly.

Pair Corralation between PriceSmart and Pan Pacific

Given the investment horizon of 90 days PriceSmart is expected to under-perform the Pan Pacific. In addition to that, PriceSmart is 1.04 times more volatile than Pan Pacific International. It trades about -0.04 of its total potential returns per unit of risk. Pan Pacific International is currently generating about 0.02 per unit of volatility. If you would invest  2,723  in Pan Pacific International on December 29, 2024 and sell it today you would earn a total of  28.00  from holding Pan Pacific International or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PriceSmart  vs.  Pan Pacific International

PriceSmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days PriceSmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, PriceSmart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pan Pacific International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Pan Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PriceSmart and Pan Pacific

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

The idea behind PriceSmart and Pan Pacific International 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.