Correlation Between Value Capital and PCB Tec

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

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

Diversification Opportunities for Value Capital and PCB Tec

-0.33

Correlation Coefficient

Value Capital  PCB Tec

Very good diversification

The 3 months correlation between Value and PCB is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Value Capital One and PCB Tec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCB Tec and Value 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 Value Capital One are associated (or correlated) with PCB Tec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCB Tec has no effect on the direction of Value Capital i.e., Value Capital and PCB Tec go up and down completely randomly.

Pair Corralation between Value Capital and PCB Tec

Assuming the 90 days trading horizon Value Capital One is expected to under-perform the PCB Tec. But the stock apears to be less risky and, when comparing its historical volatility, Value Capital One is 1.0 times less risky than PCB Tec. The stock trades about -0.11 of its potential returns per unit of risk. The PCB Tec is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  36,540  in PCB Tec on September 29, 2024 and sell it today you would earn a total of  40,490  from holding PCB Tec or generate 110.81% return on investment over 90 days.

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

Value Capital One  vs.  PCB Tec

Value Capital One

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Value Capital One are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Value Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PCB Tec

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Value Capital and PCB Tec

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

The idea behind Value Capital One and PCB Tec 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..