Correlation Between EM and PING

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

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

Diversification Opportunities for EM and PING

-0.08

Correlation Coefficient

EM  PING

Good diversification

The 3 months correlation between EM and PING is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding EM and PING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PING and EM 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 EM are associated (or correlated) with PING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PING has no effect on the direction of EM i.e., EM and PING go up and down completely randomly.

Pair Corralation between EM and PING

Assuming the 90 days horizon EM is expected to generate 40.27 times less return on investment than PING. But when comparing it to its historical volatility, EM is 6.9 times less risky than PING. It trades about 0.02 of its potential returns per unit of risk. PING is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5.51  in PING on January 25, 2024 and sell it today you would earn a total of  10.49  from holding PING or generate 190.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.8%
Values	Daily Returns

EM  vs.  PING

EM

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EM are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, EM exhibited solid returns over the last few months and may actually be approaching a breakup point.

PING

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EM and PING

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

The idea behind EM and PING 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.