Correlation Between Depo Auto and Pou Chen

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

By analyzing existing cross correlation between Depo Auto Parts and Pou Chen Corp, you can compare the effects of market volatilities on Depo Auto and Pou Chen 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 Depo Auto with a short position of Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Depo Auto and Pou Chen.

Diversification Opportunities for Depo Auto and Pou Chen

-0.67

Correlation Coefficient

Depo Auto  Pou Chen

Excellent diversification

The 3 months correlation between Depo and Pou is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Depo Auto Parts and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen Corp and Depo Auto 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 Depo Auto Parts are associated (or correlated) with Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of Depo Auto i.e., Depo Auto and Pou Chen go up and down completely randomly.

Pair Corralation between Depo Auto and Pou Chen

Assuming the 90 days trading horizon Depo Auto Parts is expected to under-perform the Pou Chen. But the stock apears to be less risky and, when comparing its historical volatility, Depo Auto Parts is 1.12 times less risky than Pou Chen. The stock trades about -0.17 of its potential returns per unit of risk. The Pou Chen Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,560  in Pou Chen Corp on September 24, 2024 and sell it today you would earn a total of  385.00  from holding Pou Chen Corp or generate 10.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Depo Auto Parts  vs.  Pou Chen Corp

Depo Auto Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Depo Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pou Chen Corp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pou Chen Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pou Chen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Depo Auto and Pou Chen

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

The idea behind Depo Auto Parts and Pou Chen Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.