Correlation Between Pacific Pipe and Permsin Steel

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

By analyzing existing cross correlation between Pacific Pipe Public and Permsin Steel Works, you can compare the effects of market volatilities on Pacific Pipe and Permsin Steel 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 Pacific Pipe with a short position of Permsin Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Pipe and Permsin Steel.

Diversification Opportunities for Pacific Pipe and Permsin Steel

0.82

Correlation Coefficient

Pacific Pipe  Permsin Steel

Very poor diversification

The 3 months correlation between Pacific and Permsin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Pipe Public and Permsin Steel Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permsin Steel Works and Pacific Pipe 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 Pacific Pipe Public are associated (or correlated) with Permsin Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permsin Steel Works has no effect on the direction of Pacific Pipe i.e., Pacific Pipe and Permsin Steel go up and down completely randomly.

Pair Corralation between Pacific Pipe and Permsin Steel

Assuming the 90 days trading horizon Pacific Pipe Public is expected to generate 1.73 times more return on investment than Permsin Steel. However, Pacific Pipe is 1.73 times more volatile than Permsin Steel Works. It trades about -0.02 of its potential returns per unit of risk. Permsin Steel Works is currently generating about -0.08 per unit of risk. If you would invest  188.00  in Pacific Pipe Public on September 14, 2024 and sell it today you would lose (18.00) from holding Pacific Pipe Public or give up 9.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Pacific Pipe Public  vs.  Permsin Steel Works

Pacific Pipe Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Pipe Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pacific Pipe is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Permsin Steel Works

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permsin Steel Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Pacific Pipe and Permsin Steel

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

The idea behind Pacific Pipe Public and Permsin Steel Works 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..