Correlation Between Pungguk Ethanol and InnoTherapy

Can any of the company-specific risk be diversified away by investing in both Pungguk Ethanol and InnoTherapy 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 InnoTherapy 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 InnoTherapy, you can compare the effects of market volatilities on Pungguk Ethanol and InnoTherapy 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 InnoTherapy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pungguk Ethanol and InnoTherapy.

Diversification Opportunities for Pungguk Ethanol and InnoTherapy

0.75

Correlation Coefficient

Pungguk Ethanol  InnoTherapy

Poor diversification

The 3 months correlation between Pungguk and InnoTherapy is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pungguk Ethanol Industrial and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy 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 InnoTherapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoTherapy has no effect on the direction of Pungguk Ethanol i.e., Pungguk Ethanol and InnoTherapy go up and down completely randomly.

Pair Corralation between Pungguk Ethanol and InnoTherapy

Assuming the 90 days trading horizon Pungguk Ethanol Industrial is expected to under-perform the InnoTherapy. But the stock apears to be less risky and, when comparing its historical volatility, Pungguk Ethanol Industrial is 3.44 times less risky than InnoTherapy. The stock trades about -0.16 of its potential returns per unit of risk. The InnoTherapy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  821,000  in InnoTherapy on September 1, 2024 and sell it today you would earn a total of  16,000  from holding InnoTherapy or generate 1.95% return on investment over 90 days.

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

Pungguk Ethanol Industrial  vs.  InnoTherapy

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.

InnoTherapy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnoTherapy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pungguk Ethanol and InnoTherapy

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

The idea behind Pungguk Ethanol Industrial and InnoTherapy 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.