Correlation Between SOJE and Power Assets

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

By analyzing existing cross correlation between SOJE and Power Assets Holdings, you can compare the effects of market volatilities on SOJE and Power Assets 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 SOJE with a short position of Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOJE and Power Assets.

Diversification Opportunities for SOJE and Power Assets

0.7

Correlation Coefficient

SOJE  Power Assets

Poor diversification

The 3 months correlation between SOJE and Power is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SOJE and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings and SOJE 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 SOJE are associated (or correlated) with Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of SOJE i.e., SOJE and Power Assets go up and down completely randomly.

Pair Corralation between SOJE and Power Assets

Given the investment horizon of 90 days SOJE is expected to under-perform the Power Assets. But the stock apears to be less risky and, when comparing its historical volatility, SOJE is 1.38 times less risky than Power Assets. The stock trades about -0.02 of its potential returns per unit of risk. The Power Assets Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  557.00  in Power Assets Holdings on February 12, 2024 and sell it today you would earn a total of  27.00  from holding Power Assets Holdings or generate 4.85% return on investment over 90 days.

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

SOJE  vs.  Power Assets Holdings

SOJE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOJE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, SOJE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Power Assets Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Assets Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Power Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SOJE and Power Assets

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

The idea behind SOJE and Power Assets Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.