Correlation Between PH Tech and Top Material

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

Diversification Opportunities for PH Tech and Top Material

0.61

Correlation Coefficient

PH Tech  Top Material

Poor diversification

The 3 months correlation between 239890 and Top is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding PH Tech Co and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material 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 Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of PH Tech i.e., PH Tech and Top Material go up and down completely randomly.

Pair Corralation between PH Tech and Top Material

Assuming the 90 days trading horizon PH Tech Co is expected to generate 1.2 times more return on investment than Top Material. However, PH Tech is 1.2 times more volatile than Top Material Co. It trades about -0.06 of its potential returns per unit of risk. Top Material Co is currently generating about -0.19 per unit of risk. If you would invest  958,000  in PH Tech Co on September 29, 2024 and sell it today you would lose (174,000) from holding PH Tech Co or give up 18.16% of portfolio value over 90 days.

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

PH Tech Co  vs.  Top Material 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.

Top Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Material 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.

Pair Trading with PH Tech and Top Material

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

The idea behind PH Tech Co and Top Material 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.