Correlation Between Alton Sports and PJ Metal

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

By analyzing existing cross correlation between Alton Sports CoLtd and PJ Metal Co, you can compare the effects of market volatilities on Alton Sports and PJ Metal 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 Alton Sports with a short position of PJ Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and PJ Metal.

Diversification Opportunities for Alton Sports and PJ Metal

-0.64

Correlation Coefficient

Alton Sports  PJ Metal

Excellent diversification

The 3 months correlation between Alton and 128660 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and PJ Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Metal and Alton Sports 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 Alton Sports CoLtd are associated (or correlated) with PJ Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Metal has no effect on the direction of Alton Sports i.e., Alton Sports and PJ Metal go up and down completely randomly.

Pair Corralation between Alton Sports and PJ Metal

Assuming the 90 days trading horizon Alton Sports is expected to generate 35.43 times less return on investment than PJ Metal. But when comparing it to its historical volatility, Alton Sports CoLtd is 4.03 times less risky than PJ Metal. It trades about 0.02 of its potential returns per unit of risk. PJ Metal Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  387,500  in PJ Metal Co on February 14, 2024 and sell it today you would earn a total of  89,500  from holding PJ Metal Co or generate 23.1% return on investment over 90 days.

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

Alton Sports CoLtd  vs.  PJ Metal Co

Alton Sports CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alton Sports CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

PJ Metal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PJ Metal Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PJ Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alton Sports and PJ Metal

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

The idea behind Alton Sports CoLtd and PJ Metal Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.