Correlation Between Pontex Polyblend and StShine Optical

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

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

Diversification Opportunities for Pontex Polyblend and StShine Optical

0.77

Correlation Coefficient

Pontex Polyblend  StShine Optical

Poor diversification

The 3 months correlation between Pontex and StShine is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Pontex Polyblend CoLtd and StShine Optical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StShine Optical and Pontex Polyblend 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 Pontex Polyblend CoLtd are associated (or correlated) with StShine Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StShine Optical has no effect on the direction of Pontex Polyblend i.e., Pontex Polyblend and StShine Optical go up and down completely randomly.

Pair Corralation between Pontex Polyblend and StShine Optical

Assuming the 90 days trading horizon Pontex Polyblend CoLtd is expected to generate 1.36 times more return on investment than StShine Optical. However, Pontex Polyblend is 1.36 times more volatile than StShine Optical Co. It trades about 0.15 of its potential returns per unit of risk. StShine Optical Co is currently generating about 0.19 per unit of risk. If you would invest  1,695  in Pontex Polyblend CoLtd on September 3, 2024 and sell it today you would earn a total of  505.00  from holding Pontex Polyblend CoLtd or generate 29.79% return on investment over 90 days.

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

Pontex Polyblend CoLtd  vs.  StShine Optical Co

Pontex Polyblend CoLtd

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pontex Polyblend CoLtd are ranked lower than 12 (%) 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.

StShine Optical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in StShine Optical Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, StShine Optical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pontex Polyblend and StShine Optical

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

The idea behind Pontex Polyblend CoLtd and StShine Optical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.