Correlation Between Mechema Chemicals and Pontex Polyblend

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

By analyzing existing cross correlation between Mechema Chemicals Int and Pontex Polyblend CoLtd, you can compare the effects of market volatilities on Mechema Chemicals and Pontex Polyblend 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 Mechema Chemicals with a short position of Pontex Polyblend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechema Chemicals and Pontex Polyblend.

Diversification Opportunities for Mechema Chemicals and Pontex Polyblend

-0.06

Correlation Coefficient

Mechema Chemicals  Pontex Polyblend

Good diversification

The 3 months correlation between Mechema and Pontex is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Mechema Chemicals Int and Pontex Polyblend CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pontex Polyblend CoLtd and Mechema Chemicals 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 Mechema Chemicals Int are associated (or correlated) with Pontex Polyblend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pontex Polyblend CoLtd has no effect on the direction of Mechema Chemicals i.e., Mechema Chemicals and Pontex Polyblend go up and down completely randomly.

Pair Corralation between Mechema Chemicals and Pontex Polyblend

Assuming the 90 days trading horizon Mechema Chemicals is expected to generate 13.44 times less return on investment than Pontex Polyblend. But when comparing it to its historical volatility, Mechema Chemicals Int is 1.79 times less risky than Pontex Polyblend. It trades about 0.02 of its potential returns per unit of risk. Pontex Polyblend CoLtd is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,740  in Pontex Polyblend CoLtd on September 8, 2024 and sell it today you would earn a total of  490.00  from holding Pontex Polyblend CoLtd or generate 28.16% return on investment over 90 days.

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

Mechema Chemicals Int  vs.  Pontex Polyblend CoLtd

Mechema Chemicals Int

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mechema Chemicals Int are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mechema Chemicals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pontex Polyblend CoLtd

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pontex Polyblend CoLtd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pontex Polyblend showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mechema Chemicals and Pontex Polyblend

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

The idea behind Mechema Chemicals Int and Pontex Polyblend CoLtd 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.