Correlation Between Pan Pacific and PLAYMATES TOYS

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

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

Diversification Opportunities for Pan Pacific and PLAYMATES TOYS

-0.06

Correlation Coefficient

Pan Pacific  PLAYMATES TOYS

Good diversification

The 3 months correlation between Pan and PLAYMATES is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pan Pacific International and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS and Pan Pacific 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 Pan Pacific International are associated (or correlated) with PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of Pan Pacific i.e., Pan Pacific and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between Pan Pacific and PLAYMATES TOYS

Assuming the 90 days horizon Pan Pacific International is expected to generate 5.33 times more return on investment than PLAYMATES TOYS. However, Pan Pacific is 5.33 times more volatile than PLAYMATES TOYS. It trades about 0.25 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about 0.11 per unit of risk. If you would invest  1,549  in Pan Pacific International on October 4, 2024 and sell it today you would earn a total of  1,031  from holding Pan Pacific International or generate 66.56% return on investment over 90 days.

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

Pan Pacific International  vs.  PLAYMATES TOYS

Pan Pacific International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pan Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

PLAYMATES TOYS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYMATES TOYS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PLAYMATES TOYS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Pacific and PLAYMATES TOYS

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

The idea behind Pan Pacific International and PLAYMATES TOYS 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.