Correlation Between Communication System and Planet Communications

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

By analyzing existing cross correlation between Communication System Solution and Planet Communications Asia, you can compare the effects of market volatilities on Communication System and Planet Communications 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 Communication System with a short position of Planet Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Communication System and Planet Communications.

Diversification Opportunities for Communication System and Planet Communications

0.09

Correlation Coefficient

Communication System  Planet Communications

Significant diversification

The 3 months correlation between Communication and Planet is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Communication System Solution and Planet Communications Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Communications and Communication System 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 Communication System Solution are associated (or correlated) with Planet Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Communications has no effect on the direction of Communication System i.e., Communication System and Planet Communications go up and down completely randomly.

Pair Corralation between Communication System and Planet Communications

Assuming the 90 days trading horizon Communication System Solution is expected to under-perform the Planet Communications. But the stock apears to be less risky and, when comparing its historical volatility, Communication System Solution is 1.68 times less risky than Planet Communications. The stock trades about -0.01 of its potential returns per unit of risk. The Planet Communications Asia is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  160.00  in Planet Communications Asia on April 24, 2025 and sell it today you would earn a total of  28.00  from holding Planet Communications Asia or generate 17.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.27%
Values	Daily Returns

Communication System Solution  vs.  Planet Communications Asia

Communication System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Communication System Solution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Communication System is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Planet Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Communications Asia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Planet Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Communication System and Planet Communications

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

The idea behind Communication System Solution and Planet Communications Asia 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.