Correlation Between PJ Metal and Top Material

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

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

Diversification Opportunities for PJ Metal and Top Material

0.4

Correlation Coefficient

PJ Metal  Top Material

Very weak diversification

The 3 months correlation between 128660 and Top is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material and PJ Metal 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 PJ Metal Co are associated (or correlated) with Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of PJ Metal i.e., PJ Metal and Top Material go up and down completely randomly.

Pair Corralation between PJ Metal and Top Material

Assuming the 90 days trading horizon PJ Metal is expected to generate 1.12 times less return on investment than Top Material. But when comparing it to its historical volatility, PJ Metal Co is 1.47 times less risky than Top Material. It trades about 0.01 of its potential returns per unit of risk. Top Material Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,938,434  in Top Material Co on August 29, 2024 and sell it today you would lose (848,434) from holding Top Material Co or give up 21.54% of portfolio value over 90 days.

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

PJ Metal Co  vs.  Top Material Co

PJ Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJ Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PJ Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Top Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Material Co 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PJ Metal and Top Material

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

The idea behind PJ Metal Co and Top Material 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.