Correlation Between Payton Planar and Aedifica

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

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

Diversification Opportunities for Payton Planar and Aedifica

-0.6

Correlation Coefficient

Payton Planar  Aedifica

Excellent diversification

The 3 months correlation between Payton and Aedifica is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Payton Planar Magnetics and Aedifica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedifica and Payton Planar 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 Payton Planar Magnetics are associated (or correlated) with Aedifica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedifica has no effect on the direction of Payton Planar i.e., Payton Planar and Aedifica go up and down completely randomly.

Pair Corralation between Payton Planar and Aedifica

Assuming the 90 days trading horizon Payton Planar Magnetics is expected to generate 2.03 times more return on investment than Aedifica. However, Payton Planar is 2.03 times more volatile than Aedifica. It trades about -0.03 of its potential returns per unit of risk. Aedifica is currently generating about -0.06 per unit of risk. If you would invest  800.00  in Payton Planar Magnetics on September 1, 2024 and sell it today you would lose (50.00) from holding Payton Planar Magnetics or give up 6.25% of portfolio value over 90 days.

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

Payton Planar Magnetics  vs.  Aedifica

Payton Planar Magnetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Payton Planar Magnetics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Payton Planar is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Aedifica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aedifica has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Aedifica is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Payton Planar and Aedifica

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

The idea behind Payton Planar Magnetics and Aedifica 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.