Correlation Between Post and Global Electrical

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

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

Diversification Opportunities for Post and Global Electrical

0.71

Correlation Coefficient

Post  Global Electrical

Poor diversification

The 3 months correlation between Post and Global is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Post and Telecommunications and Global Electrical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Electrical and Post 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 Post and Telecommunications are associated (or correlated) with Global Electrical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Electrical has no effect on the direction of Post i.e., Post and Global Electrical go up and down completely randomly.

Pair Corralation between Post and Global Electrical

Assuming the 90 days trading horizon Post is expected to generate 2.25 times less return on investment than Global Electrical. But when comparing it to its historical volatility, Post and Telecommunications is 2.55 times less risky than Global Electrical. It trades about 0.01 of its potential returns per unit of risk. Global Electrical Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,600,000  in Global Electrical Technology on September 21, 2024 and sell it today you would lose (20,000) from holding Global Electrical Technology or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.18%
Values	Daily Returns

Post and Telecommunications  vs.  Global Electrical Technology

Post and Telecommuni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Post and Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Global Electrical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Electrical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Post and Global Electrical

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

The idea behind Post and Telecommunications and Global Electrical Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.