Correlation Between Piotech and Aerospace

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Piotech and Aerospace 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 Piotech and Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Piotech Inc A and Aerospace Hi Tech Holding, you can compare the effects of market volatilities on Piotech and Aerospace 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 Piotech with a short position of Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piotech and Aerospace.

Diversification Opportunities for Piotech and Aerospace

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Piotech and Aerospace is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Piotech Inc A and Aerospace Hi Tech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Hi Tech and Piotech 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 Piotech Inc A are associated (or correlated) with Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Hi Tech has no effect on the direction of Piotech i.e., Piotech and Aerospace go up and down completely randomly.

Pair Corralation between Piotech and Aerospace

Assuming the 90 days trading horizon Piotech Inc A is expected to generate 1.44 times more return on investment than Aerospace. However, Piotech is 1.44 times more volatile than Aerospace Hi Tech Holding. It trades about 0.17 of its potential returns per unit of risk. Aerospace Hi Tech Holding is currently generating about 0.13 per unit of risk. If you would invest  10,345  in Piotech Inc A on September 23, 2024 and sell it today you would earn a total of  6,511  from holding Piotech Inc A or generate 62.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Piotech Inc A  vs.  Aerospace Hi Tech Holding

 Performance 
       Timeline  
Piotech Inc A 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Piotech Inc A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Piotech sustained solid returns over the last few months and may actually be approaching a breakup point.
Aerospace Hi Tech 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aerospace Hi Tech Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Piotech and Aerospace Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Piotech and Aerospace

The main advantage of trading using opposite Piotech and Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piotech position performs unexpectedly, Aerospace 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 Aerospace will offset losses from the drop in Aerospace's long position.
The idea behind Piotech Inc A and Aerospace Hi Tech Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

Other Complementary Tools

Transaction History
View history of all your transactions and understand their impact on performance
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
CEOs Directory
Screen CEOs from public companies around the world
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Sectors
List of equity sectors categorizing publicly traded companies based on their primary business activities