Correlation Between Danel and PCB Tec

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

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

Diversification Opportunities for Danel and PCB Tec

0.84

Correlation Coefficient

Danel  PCB Tec

Very poor diversification

The 3 months correlation between Danel and PCB is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Danel and PCB Tec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCB Tec and Danel 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 Danel 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 Danel i.e., Danel and PCB Tec go up and down completely randomly.

Pair Corralation between Danel and PCB Tec

Assuming the 90 days trading horizon Danel is expected to generate 43.49 times less return on investment than PCB Tec. But when comparing it to its historical volatility, Danel is 1.77 times less risky than PCB Tec. It trades about 0.02 of its potential returns per unit of risk. PCB Tec is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  65,200  in PCB Tec on September 29, 2024 and sell it today you would earn a total of  11,830  from holding PCB Tec or generate 18.14% return on investment over 90 days.

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

Danel  vs.  PCB Tec

Danel

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Danel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Danel sustained solid returns over the last few months and may actually be approaching a breakup point.

PCB Tec

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PCB Tec are ranked lower than 14 (%) 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 Danel and PCB Tec

The main advantage of trading using opposite Danel and PCB Tec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danel 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 Danel 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..