Correlation Between PV2 Investment and FIT INVEST

Can any of the company-specific risk be diversified away by investing in both PV2 Investment and FIT INVEST 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 PV2 Investment and FIT INVEST into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PV2 Investment JSC and FIT INVEST JSC, you can compare the effects of market volatilities on PV2 Investment and FIT INVEST 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 PV2 Investment with a short position of FIT INVEST. Check out your portfolio center. Please also check ongoing floating volatility patterns of PV2 Investment and FIT INVEST.

Diversification Opportunities for PV2 Investment and FIT INVEST

-0.35

Correlation Coefficient

PV2 Investment  FIT INVEST

Very good diversification

The 3 months correlation between PV2 and FIT is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding PV2 Investment JSC and FIT INVEST JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIT INVEST JSC and PV2 Investment 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 PV2 Investment JSC are associated (or correlated) with FIT INVEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIT INVEST JSC has no effect on the direction of PV2 Investment i.e., PV2 Investment and FIT INVEST go up and down completely randomly.

Pair Corralation between PV2 Investment and FIT INVEST

Assuming the 90 days trading horizon PV2 Investment JSC is expected to generate 5.83 times more return on investment than FIT INVEST. However, PV2 Investment is 5.83 times more volatile than FIT INVEST JSC. It trades about 0.13 of its potential returns per unit of risk. FIT INVEST JSC is currently generating about 0.01 per unit of risk. If you would invest  250,000  in PV2 Investment JSC on December 27, 2024 and sell it today you would earn a total of  90,000  from holding PV2 Investment JSC or generate 36.0% return on investment over 90 days.

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

PV2 Investment JSC  vs.  FIT INVEST JSC

PV2 Investment JSC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PV2 Investment JSC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, PV2 Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

FIT INVEST JSC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FIT INVEST JSC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, FIT INVEST is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PV2 Investment and FIT INVEST

The main advantage of trading using opposite PV2 Investment and FIT INVEST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PV2 Investment position performs unexpectedly, FIT INVEST 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 FIT INVEST will offset losses from the drop in FIT INVEST's long position.

The idea behind PV2 Investment JSC and FIT INVEST JSC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.