Correlation Between Payton Planar and Tessenderlo

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

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

Diversification Opportunities for Payton Planar and Tessenderlo

-0.64

Correlation Coefficient

Payton Planar  Tessenderlo

Excellent diversification

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

Pair Corralation between Payton Planar and Tessenderlo

Assuming the 90 days trading horizon Payton Planar Magnetics is expected to under-perform the Tessenderlo. But the stock apears to be less risky and, when comparing its historical volatility, Payton Planar Magnetics is 1.03 times less risky than Tessenderlo. The stock trades about -0.03 of its potential returns per unit of risk. The Tessenderlo is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,465  in Tessenderlo on February 5, 2024 and sell it today you would lose (25.00) from holding Tessenderlo or give up 1.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.12%
Values	Daily Returns

Payton Planar Magnetics  vs.  Tessenderlo

Payton Planar Magnetics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payton Planar Magnetics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Payton Planar reported solid returns over the last few months and may actually be approaching a breakup point.

Tessenderlo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tessenderlo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Payton Planar and Tessenderlo

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

The idea behind Payton Planar Magnetics and Tessenderlo 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.