Correlation Between PESTECH International and JAKS Resources

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

By analyzing existing cross correlation between PESTECH International Bhd and JAKS Resources Bhd, you can compare the effects of market volatilities on PESTECH International and JAKS Resources 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 PESTECH International with a short position of JAKS Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of PESTECH International and JAKS Resources.

Diversification Opportunities for PESTECH International and JAKS Resources

0.02

Correlation Coefficient

PESTECH International  JAKS Resources

Significant diversification

The 3 months correlation between PESTECH and JAKS is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding PESTECH International Bhd and JAKS Resources Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAKS Resources Bhd and PESTECH International 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 PESTECH International Bhd are associated (or correlated) with JAKS Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAKS Resources Bhd has no effect on the direction of PESTECH International i.e., PESTECH International and JAKS Resources go up and down completely randomly.

Pair Corralation between PESTECH International and JAKS Resources

Assuming the 90 days trading horizon PESTECH International Bhd is expected to generate 1.21 times more return on investment than JAKS Resources. However, PESTECH International is 1.21 times more volatile than JAKS Resources Bhd. It trades about 0.44 of its potential returns per unit of risk. JAKS Resources Bhd is currently generating about -0.05 per unit of risk. If you would invest  12.00  in PESTECH International Bhd on September 24, 2024 and sell it today you would earn a total of  8.00  from holding PESTECH International Bhd or generate 66.67% return on investment over 90 days.

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

PESTECH International Bhd  vs.  JAKS Resources Bhd

PESTECH International Bhd

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PESTECH International Bhd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, PESTECH International disclosed solid returns over the last few months and may actually be approaching a breakup point.

JAKS Resources Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAKS Resources Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, JAKS Resources is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PESTECH International and JAKS Resources

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

The idea behind PESTECH International Bhd and JAKS Resources Bhd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .