Correlation Between Transport and PV2 Investment

Can any of the company-specific risk be diversified away by investing in both Transport and PV2 Investment 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 Transport and PV2 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transport and Industry and PV2 Investment JSC, you can compare the effects of market volatilities on Transport and PV2 Investment 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 Transport with a short position of PV2 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and PV2 Investment.

Diversification Opportunities for Transport and PV2 Investment

0.52

Correlation Coefficient

Transport  PV2 Investment

Very weak diversification

The 3 months correlation between Transport and PV2 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and PV2 Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PV2 Investment JSC and Transport 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 Transport and Industry are associated (or correlated) with PV2 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PV2 Investment JSC has no effect on the direction of Transport i.e., Transport and PV2 Investment go up and down completely randomly.

Pair Corralation between Transport and PV2 Investment

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the PV2 Investment. But the stock apears to be less risky and, when comparing its historical volatility, Transport and Industry is 2.17 times less risky than PV2 Investment. The stock trades about -0.17 of its potential returns per unit of risk. The PV2 Investment JSC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  270,000  in PV2 Investment JSC on September 23, 2024 and sell it today you would lose (20,000) from holding PV2 Investment JSC or give up 7.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Transport and Industry  vs.  PV2 Investment JSC

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

PV2 Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PV2 Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PV2 Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Transport and PV2 Investment

The main advantage of trading using opposite Transport and PV2 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport position performs unexpectedly, PV2 Investment 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 PV2 Investment will offset losses from the drop in PV2 Investment's long position.

The idea behind Transport and Industry and PV2 Investment JSC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.