Correlation Between PM Capital and Wam Leaders

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

Diversification Opportunities for PM Capital and Wam Leaders

0.61

Correlation Coefficient

PM Capital  Wam Leaders

Poor diversification

The 3 months correlation between PGF and Wam is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding PM Capital Global and Wam Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wam Leaders 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 Wam Leaders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wam Leaders has no effect on the direction of PM Capital i.e., PM Capital and Wam Leaders go up and down completely randomly.

Pair Corralation between PM Capital and Wam Leaders

Assuming the 90 days trading horizon PM Capital Global is expected to generate 0.99 times more return on investment than Wam Leaders. However, PM Capital Global is 1.01 times less risky than Wam Leaders. It trades about 0.11 of its potential returns per unit of risk. Wam Leaders is currently generating about 0.02 per unit of risk. If you would invest  216.00  in PM Capital Global on September 4, 2024 and sell it today you would earn a total of  14.00  from holding PM Capital Global or generate 6.48% 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.  Wam Leaders

PM Capital Global

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PM Capital Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, PM Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wam Leaders

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wam Leaders are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Wam Leaders is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PM Capital and Wam Leaders

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

The idea behind PM Capital Global and Wam Leaders 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 Stocks Directory module to find actively traded stocks across global markets.