Correlation Between PJ Metal and SK Holdings

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

By analyzing existing cross correlation between PJ Metal Co and SK Holdings Co, you can compare the effects of market volatilities on PJ Metal and SK Holdings 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 PJ Metal with a short position of SK Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PJ Metal and SK Holdings.

Diversification Opportunities for PJ Metal and SK Holdings

0.7

Correlation Coefficient

PJ Metal  SK Holdings

Poor diversification

The 3 months correlation between 128660 and 034730 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and SK Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Holdings and PJ Metal 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 PJ Metal Co are associated (or correlated) with SK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Holdings has no effect on the direction of PJ Metal i.e., PJ Metal and SK Holdings go up and down completely randomly.

Pair Corralation between PJ Metal and SK Holdings

Assuming the 90 days trading horizon PJ Metal Co is expected to generate 2.03 times more return on investment than SK Holdings. However, PJ Metal is 2.03 times more volatile than SK Holdings Co. It trades about 0.02 of its potential returns per unit of risk. SK Holdings Co is currently generating about -0.1 per unit of risk. If you would invest  296,903  in PJ Metal Co on September 29, 2024 and sell it today you would earn a total of  4,097  from holding PJ Metal Co or generate 1.38% return on investment over 90 days.

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

PJ Metal Co  vs.  SK Holdings Co

PJ Metal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PJ Metal Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, PJ Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SK Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Holdings Co 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 PJ Metal and SK Holdings

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

The idea behind PJ Metal Co and SK Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.