Correlation Between Thermo Fisher and Penta-Ocean Construction

Can any of the company-specific risk be diversified away by investing in both Thermo Fisher and Penta-Ocean Construction 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 Thermo Fisher and Penta-Ocean Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thermo Fisher Scientific and Penta Ocean Construction Co, you can compare the effects of market volatilities on Thermo Fisher and Penta-Ocean Construction 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 Thermo Fisher with a short position of Penta-Ocean Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermo Fisher and Penta-Ocean Construction.

Diversification Opportunities for Thermo Fisher and Penta-Ocean Construction

0.53

Correlation Coefficient

Thermo Fisher  Penta-Ocean Construction

Very weak diversification

The 3 months correlation between Thermo and Penta-Ocean is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta-Ocean Construction and Thermo Fisher 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 Thermo Fisher Scientific are associated (or correlated) with Penta-Ocean Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta-Ocean Construction has no effect on the direction of Thermo Fisher i.e., Thermo Fisher and Penta-Ocean Construction go up and down completely randomly.

Pair Corralation between Thermo Fisher and Penta-Ocean Construction

Assuming the 90 days horizon Thermo Fisher Scientific is expected to generate 1.33 times more return on investment than Penta-Ocean Construction. However, Thermo Fisher is 1.33 times more volatile than Penta Ocean Construction Co. It trades about 0.11 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.06 per unit of risk. If you would invest  50,611  in Thermo Fisher Scientific on October 9, 2024 and sell it today you would earn a total of  1,239  from holding Thermo Fisher Scientific or generate 2.45% return on investment over 90 days.

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

Thermo Fisher Scientific  vs.  Penta Ocean Construction Co

Thermo Fisher Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thermo Fisher is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Penta-Ocean Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penta-Ocean Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Thermo Fisher and Penta-Ocean Construction

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

The idea behind Thermo Fisher Scientific and Penta Ocean Construction Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.