Correlation Between Afcon Holdings and PCB Tec

Can any of the company-specific risk be diversified away by investing in both Afcon Holdings and PCB Tec 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 Afcon Holdings and PCB Tec into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Afcon Holdings and PCB Tec, you can compare the effects of market volatilities on Afcon Holdings and PCB Tec 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 Afcon Holdings with a short position of PCB Tec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afcon Holdings and PCB Tec.

Diversification Opportunities for Afcon Holdings and PCB Tec

0.59

Correlation Coefficient

Afcon Holdings  PCB Tec

Very weak diversification

The 3 months correlation between Afcon and PCB is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Afcon Holdings and PCB Tec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCB Tec and Afcon Holdings 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 Afcon Holdings are associated (or correlated) with PCB Tec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCB Tec has no effect on the direction of Afcon Holdings i.e., Afcon Holdings and PCB Tec go up and down completely randomly.

Pair Corralation between Afcon Holdings and PCB Tec

Assuming the 90 days trading horizon Afcon Holdings is expected to generate 0.73 times more return on investment than PCB Tec. However, Afcon Holdings is 1.37 times less risky than PCB Tec. It trades about 0.4 of its potential returns per unit of risk. PCB Tec is currently generating about 0.18 per unit of risk. If you would invest  900,000  in Afcon Holdings on September 16, 2024 and sell it today you would earn a total of  590,000  from holding Afcon Holdings or generate 65.56% return on investment over 90 days.

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

Afcon Holdings  vs.  PCB Tec

Afcon Holdings

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Afcon Holdings are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Afcon Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

PCB Tec

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Afcon Holdings and PCB Tec

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

The idea behind Afcon Holdings and PCB Tec 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.