Correlation Between Caribbean Utilities and PJX Resources

Can any of the company-specific risk be diversified away by investing in both Caribbean Utilities and PJX Resources 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 Caribbean Utilities and PJX Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Caribbean Utilities and PJX Resources

0.64

Correlation Coefficient

Caribbean Utilities  PJX Resources

Poor diversification

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

Pair Corralation between Caribbean Utilities and PJX Resources

Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 0.09 times more return on investment than PJX Resources. However, Caribbean Utilities is 11.42 times less risky than PJX Resources. It trades about 0.17 of its potential returns per unit of risk. PJX Resources is currently generating about 0.02 per unit of risk. If you would invest  1,351  in Caribbean Utilities on September 10, 2024 and sell it today you would earn a total of  48.00  from holding Caribbean Utilities or generate 3.55% return on investment over 90 days.

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

Caribbean Utilities  vs.  PJX Resources

Caribbean Utilities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caribbean Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

PJX Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJX Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Caribbean Utilities and PJX Resources

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

The idea behind Caribbean Utilities and PJX Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.