Correlation Between Plandai Biotech and AB International

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

By analyzing existing cross correlation between Plandai Biotech and AB International Group, you can compare the effects of market volatilities on Plandai Biotech and AB International 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 Plandai Biotech with a short position of AB International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plandai Biotech and AB International.

Diversification Opportunities for Plandai Biotech and AB International

-0.32

Correlation Coefficient

Plandai Biotech  AB International

Very good diversification

The 3 months correlation between Plandai and ABQQ is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Plandai Biotech and AB International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB International and Plandai Biotech 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 Plandai Biotech are associated (or correlated) with AB International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB International has no effect on the direction of Plandai Biotech i.e., Plandai Biotech and AB International go up and down completely randomly.

Pair Corralation between Plandai Biotech and AB International

Given the investment horizon of 90 days Plandai Biotech is expected to generate 2.47 times more return on investment than AB International. However, Plandai Biotech is 2.47 times more volatile than AB International Group. It trades about 0.18 of its potential returns per unit of risk. AB International Group is currently generating about 0.13 per unit of risk. If you would invest  0.02  in Plandai Biotech on September 12, 2024 and sell it today you would lose (0.01) from holding Plandai Biotech or give up 50.0% of portfolio value over 90 days.

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

Plandai Biotech  vs.  AB International Group

Plandai Biotech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plandai Biotech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Plandai Biotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

AB International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB International Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, AB International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plandai Biotech and AB International

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

The idea behind Plandai Biotech and AB International Group 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.