Correlation Between Penta Ocean and Vornado Realty

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

By analyzing existing cross correlation between Penta Ocean Construction Co and Vornado Realty Trust, you can compare the effects of market volatilities on Penta Ocean and Vornado Realty 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 Penta Ocean with a short position of Vornado Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Vornado Realty.

Diversification Opportunities for Penta Ocean and Vornado Realty

-0.38

Correlation Coefficient

Penta Ocean  Vornado Realty

Very good diversification

The 3 months correlation between Penta and Vornado is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of Penta Ocean i.e., Penta Ocean and Vornado Realty go up and down completely randomly.

Pair Corralation between Penta Ocean and Vornado Realty

Assuming the 90 days horizon Penta Ocean is expected to generate 25.81 times less return on investment than Vornado Realty. But when comparing it to its historical volatility, Penta Ocean Construction Co is 1.98 times less risky than Vornado Realty. It trades about 0.01 of its potential returns per unit of risk. Vornado Realty Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,404  in Vornado Realty Trust on September 20, 2024 and sell it today you would earn a total of  556.00  from holding Vornado Realty Trust or generate 16.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Penta Ocean Construction Co  vs.  Vornado Realty Trust

Penta Ocean Construc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vornado Realty Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vornado Realty Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vornado Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penta Ocean and Vornado Realty

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

The idea behind Penta Ocean Construction Co and Vornado Realty Trust 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.