Correlation Between SoundHound and Petra Diamonds

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

By analyzing existing cross correlation between SoundHound AI and Petra Diamonds Limited, you can compare the effects of market volatilities on SoundHound and Petra Diamonds 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 SoundHound with a short position of Petra Diamonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and Petra Diamonds.

Diversification Opportunities for SoundHound and Petra Diamonds

0.51

Correlation Coefficient

SoundHound  Petra Diamonds

Very weak diversification

The 3 months correlation between SoundHound and Petra is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and Petra Diamonds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petra Diamonds and SoundHound 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 SoundHound AI are associated (or correlated) with Petra Diamonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petra Diamonds has no effect on the direction of SoundHound i.e., SoundHound and Petra Diamonds go up and down completely randomly.

Pair Corralation between SoundHound and Petra Diamonds

Given the investment horizon of 90 days SoundHound AI is expected to generate 3.24 times more return on investment than Petra Diamonds. However, SoundHound is 3.24 times more volatile than Petra Diamonds Limited. It trades about 0.06 of its potential returns per unit of risk. Petra Diamonds Limited is currently generating about -0.08 per unit of risk. If you would invest  598.00  in SoundHound AI on December 5, 2024 and sell it today you would earn a total of  374.00  from holding SoundHound AI or generate 62.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.01%
Values	Daily Returns

SoundHound AI  vs.  Petra Diamonds Limited

SoundHound AI

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoundHound AI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Petra Diamonds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petra Diamonds Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SoundHound and Petra Diamonds

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

The idea behind SoundHound AI and Petra Diamonds Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.