Correlation Between PM Capital and Staude Capital

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

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

Diversification Opportunities for PM Capital and Staude Capital

0.63

Correlation Coefficient

PM Capital  Staude Capital

Poor diversification

The 3 months correlation between PGF and Staude is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PM Capital Global and Staude Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Staude Capital Global and PM Capital 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 PM Capital Global are associated (or correlated) with Staude Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Staude Capital Global has no effect on the direction of PM Capital i.e., PM Capital and Staude Capital go up and down completely randomly.

Pair Corralation between PM Capital and Staude Capital

Assuming the 90 days trading horizon PM Capital is expected to generate 1.03 times less return on investment than Staude Capital. But when comparing it to its historical volatility, PM Capital Global is 1.52 times less risky than Staude Capital. It trades about 0.08 of its potential returns per unit of risk. Staude Capital Global is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  124.00  in Staude Capital Global on September 2, 2024 and sell it today you would earn a total of  6.00  from holding Staude Capital Global or generate 4.84% return on investment over 90 days.

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

PM Capital Global  vs.  Staude Capital Global

PM Capital Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PM Capital Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, PM Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Staude Capital Global

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Staude Capital Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Staude Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PM Capital and Staude Capital

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

The idea behind PM Capital Global and Staude Capital Global 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.