Correlation Between Payton Planar and Automatic Bank

Can any of the company-specific risk be diversified away by investing in both Payton Planar and Automatic Bank 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 Automatic Bank 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 Automatic Bank Services, you can compare the effects of market volatilities on Payton Planar and Automatic Bank 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 Automatic Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payton Planar and Automatic Bank.

Diversification Opportunities for Payton Planar and Automatic Bank

-0.27

Correlation Coefficient

Payton Planar  Automatic Bank

Very good diversification

The 3 months correlation between Payton and Automatic is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Payton Planar Magnetics and Automatic Bank Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Bank Services 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 Automatic Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Bank Services has no effect on the direction of Payton Planar i.e., Payton Planar and Automatic Bank go up and down completely randomly.

Pair Corralation between Payton Planar and Automatic Bank

Assuming the 90 days trading horizon Payton Planar Magnetics is expected to under-perform the Automatic Bank. But the stock apears to be less risky and, when comparing its historical volatility, Payton Planar Magnetics is 1.06 times less risky than Automatic Bank. The stock trades about -0.03 of its potential returns per unit of risk. The Automatic Bank Services is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest  142,000  in Automatic Bank Services on September 16, 2024 and sell it today you would earn a total of  112,800  from holding Automatic Bank Services or generate 79.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.21%
Values	Daily Returns

Payton Planar Magnetics  vs.  Automatic Bank Services

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.

Automatic Bank Services

Risk-Adjusted Performance

40 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Bank Services are ranked lower than 40 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automatic Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Payton Planar and Automatic Bank

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

The idea behind Payton Planar Magnetics and Automatic Bank Services 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.