Correlation Between Pudgy Penguins and LOOM

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Can any of the company-specific risk be diversified away by investing in both Pudgy Penguins and LOOM 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 Pudgy Penguins and LOOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pudgy Penguins and LOOM, you can compare the effects of market volatilities on Pudgy Penguins and LOOM 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 Pudgy Penguins with a short position of LOOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pudgy Penguins and LOOM.

Diversification Opportunities for Pudgy Penguins and LOOM

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Pudgy and LOOM is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Pudgy Penguins and LOOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOOM and Pudgy Penguins 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 Pudgy Penguins are associated (or correlated) with LOOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOOM has no effect on the direction of Pudgy Penguins i.e., Pudgy Penguins and LOOM go up and down completely randomly.

Pair Corralation between Pudgy Penguins and LOOM

Assuming the 90 days trading horizon Pudgy Penguins is expected to generate 0.77 times more return on investment than LOOM. However, Pudgy Penguins is 1.3 times less risky than LOOM. It trades about 0.26 of its potential returns per unit of risk. LOOM is currently generating about -0.24 per unit of risk. If you would invest  0.73  in Pudgy Penguins on April 23, 2025 and sell it today you would earn a total of  2.36  from holding Pudgy Penguins or generate 322.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pudgy Penguins  vs.  LOOM

 Performance 
       Timeline  
Pudgy Penguins 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Pudgy Penguins are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Pudgy Penguins exhibited solid returns over the last few months and may actually be approaching a breakup point.
LOOM 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days LOOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for LOOM shareholders.

Pudgy Penguins and LOOM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pudgy Penguins and LOOM

The main advantage of trading using opposite Pudgy Penguins and LOOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pudgy Penguins position performs unexpectedly, LOOM 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 LOOM will offset losses from the drop in LOOM's long position.
The idea behind Pudgy Penguins and LOOM 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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