Correlation Between Intel and PSB Holdings

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

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

Diversification Opportunities for Intel and PSB Holdings

0.64

Correlation Coefficient

Intel  PSB Holdings

Poor diversification

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

Pair Corralation between Intel and PSB Holdings

Given the investment horizon of 90 days Intel is expected to generate 2.96 times more return on investment than PSB Holdings. However, Intel is 2.96 times more volatile than PSB Holdings. It trades about 0.12 of its potential returns per unit of risk. PSB Holdings is currently generating about 0.2 per unit of risk. If you would invest  2,010  in Intel on September 2, 2024 and sell it today you would earn a total of  395.00  from holding Intel or generate 19.65% return on investment over 90 days.

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

Intel  vs.  PSB Holdings

Intel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Intel exhibited solid returns over the last few months and may actually be approaching a breakup point.

PSB Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PSB Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, PSB Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Intel and PSB Holdings

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

The idea behind Intel and PSB Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.