Correlation Between Azimut Exploration and Progressive Planet

Can any of the company-specific risk be diversified away by investing in both Azimut Exploration and Progressive Planet 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 Azimut Exploration and Progressive Planet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Azimut Exploration and Progressive Planet Solutions, you can compare the effects of market volatilities on Azimut Exploration and Progressive Planet 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 Azimut Exploration with a short position of Progressive Planet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azimut Exploration and Progressive Planet.

Diversification Opportunities for Azimut Exploration and Progressive Planet

0.64

Correlation Coefficient

Azimut Exploration  Progressive Planet

Poor diversification

The 3 months correlation between Azimut and Progressive is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Azimut Exploration and Progressive Planet Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Planet and Azimut Exploration 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 Azimut Exploration are associated (or correlated) with Progressive Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive Planet has no effect on the direction of Azimut Exploration i.e., Azimut Exploration and Progressive Planet go up and down completely randomly.

Pair Corralation between Azimut Exploration and Progressive Planet

Assuming the 90 days horizon Azimut Exploration is expected to generate 2.5 times less return on investment than Progressive Planet. But when comparing it to its historical volatility, Azimut Exploration is 1.03 times less risky than Progressive Planet. It trades about 0.08 of its potential returns per unit of risk. Progressive Planet Solutions is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6.20  in Progressive Planet Solutions on September 13, 2024 and sell it today you would earn a total of  6.80  from holding Progressive Planet Solutions or generate 109.68% return on investment over 90 days.

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

Azimut Exploration  vs.  Progressive Planet Solutions

Azimut Exploration

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azimut Exploration are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Azimut Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Progressive Planet

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Progressive Planet Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Progressive Planet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azimut Exploration and Progressive Planet

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

The idea behind Azimut Exploration and Progressive Planet Solutions 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.