Correlation Between PC Connection and PAM Transportation

Can any of the company-specific risk be diversified away by investing in both PC Connection and PAM Transportation 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 PC Connection and PAM Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PC Connection and PAM Transportation Services, you can compare the effects of market volatilities on PC Connection and PAM Transportation 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 PC Connection with a short position of PAM Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of PC Connection and PAM Transportation.

Diversification Opportunities for PC Connection and PAM Transportation

-0.38

Correlation Coefficient

PC Connection  PAM Transportation

Very good diversification

The 3 months correlation between CNXN and PAM is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding PC Connection and PAM Transportation Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAM Transportation and PC Connection 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 PC Connection are associated (or correlated) with PAM Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAM Transportation has no effect on the direction of PC Connection i.e., PC Connection and PAM Transportation go up and down completely randomly.

Pair Corralation between PC Connection and PAM Transportation

Given the investment horizon of 90 days PC Connection is expected to under-perform the PAM Transportation. But the stock apears to be less risky and, when comparing its historical volatility, PC Connection is 1.86 times less risky than PAM Transportation. The stock trades about -0.03 of its potential returns per unit of risk. The PAM Transportation Services is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,741  in PAM Transportation Services on September 24, 2024 and sell it today you would earn a total of  439.00  from holding PAM Transportation Services or generate 25.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.92%
Values	Daily Returns

PC Connection  vs.  PAM Transportation Services

PC Connection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PC Connection has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PC Connection is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PAM Transportation

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days PAM Transportation Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, PAM Transportation demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PC Connection and PAM Transportation

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

The idea behind PC Connection and PAM Transportation Services 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.