Correlation Between Pungguk Ethanol and Settlebank

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

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

Diversification Opportunities for Pungguk Ethanol and Settlebank

0.93

Correlation Coefficient

Pungguk Ethanol  Settlebank

Almost no diversification

The 3 months correlation between Pungguk and Settlebank is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Pungguk Ethanol Industrial and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank and Pungguk Ethanol 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 Pungguk Ethanol Industrial are associated (or correlated) with Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of Pungguk Ethanol i.e., Pungguk Ethanol and Settlebank go up and down completely randomly.

Pair Corralation between Pungguk Ethanol and Settlebank

Assuming the 90 days trading horizon Pungguk Ethanol Industrial is expected to generate 0.39 times more return on investment than Settlebank. However, Pungguk Ethanol Industrial is 2.58 times less risky than Settlebank. It trades about -0.13 of its potential returns per unit of risk. Settlebank is currently generating about -0.06 per unit of risk. If you would invest  1,041,000  in Pungguk Ethanol Industrial on September 24, 2024 and sell it today you would lose (93,000) from holding Pungguk Ethanol Industrial or give up 8.93% of portfolio value over 90 days.

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

Pungguk Ethanol Industrial  vs.  Settlebank

Pungguk Ethanol Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pungguk Ethanol Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pungguk Ethanol and Settlebank

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

The idea behind Pungguk Ethanol Industrial and Settlebank 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 Transaction History module to view history of all your transactions and understand their impact on performance.