Correlation Between PH Tech and Formetal

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

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

Diversification Opportunities for PH Tech and Formetal

-0.21

Correlation Coefficient

PH Tech  Formetal

Very good diversification

The 3 months correlation between 239890 and Formetal is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding PH Tech Co and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal and PH Tech 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 PH Tech Co are associated (or correlated) with Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of PH Tech i.e., PH Tech and Formetal go up and down completely randomly.

Pair Corralation between PH Tech and Formetal

Assuming the 90 days trading horizon PH Tech Co is expected to under-perform the Formetal. In addition to that, PH Tech is 1.26 times more volatile than Formetal Co. It trades about -0.08 of its total potential returns per unit of risk. Formetal Co is currently generating about 0.12 per unit of volatility. If you would invest  272,000  in Formetal Co on September 16, 2024 and sell it today you would earn a total of  65,500  from holding Formetal Co or generate 24.08% return on investment over 90 days.

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

PH Tech Co  vs.  Formetal Co

PH Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PH Tech Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Formetal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PH Tech and Formetal

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

The idea behind PH Tech Co and Formetal 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.