Correlation Between PHN Multi and PHN Canadian

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

By analyzing existing cross correlation between PHN Multi Style All Cap and PHN Canadian Equity, you can compare the effects of market volatilities on PHN Multi and PHN Canadian 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 PHN Multi with a short position of PHN Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHN Multi and PHN Canadian.

Diversification Opportunities for PHN Multi and PHN Canadian

0.96

Correlation Coefficient

PHN Multi  PHN Canadian

Almost no diversification

The 3 months correlation between PHN and PHN is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding PHN Multi Style All Cap and PHN Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHN Canadian Equity and PHN Multi 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 PHN Multi Style All Cap are associated (or correlated) with PHN Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHN Canadian Equity has no effect on the direction of PHN Multi i.e., PHN Multi and PHN Canadian go up and down completely randomly.

Pair Corralation between PHN Multi and PHN Canadian

Assuming the 90 days trading horizon PHN Multi Style All Cap is expected to generate 1.47 times more return on investment than PHN Canadian. However, PHN Multi is 1.47 times more volatile than PHN Canadian Equity. It trades about 0.26 of its potential returns per unit of risk. PHN Canadian Equity is currently generating about 0.33 per unit of risk. If you would invest  2,572  in PHN Multi Style All Cap on August 31, 2024 and sell it today you would earn a total of  311.00  from holding PHN Multi Style All Cap or generate 12.09% return on investment over 90 days.

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

PHN Multi Style All Cap  vs.  PHN Canadian Equity

PHN Multi Style

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Multi Style All Cap are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, PHN Multi may actually be approaching a critical reversion point that can send shares even higher in December 2024.

PHN Canadian Equity

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Canadian Equity are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, PHN Canadian may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with PHN Multi and PHN Canadian

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

The idea behind PHN Multi Style All Cap and PHN Canadian Equity 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..