Correlation Between Hibiscus Petroleum and ViTrox Bhd

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

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

Diversification Opportunities for Hibiscus Petroleum and ViTrox Bhd

-0.2

Correlation Coefficient

Hibiscus Petroleum  ViTrox Bhd

Good diversification

The 3 months correlation between Hibiscus and ViTrox is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hibiscus Petroleum BHD and ViTrox Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViTrox Bhd and Hibiscus Petroleum 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 Hibiscus Petroleum BHD are associated (or correlated) with ViTrox Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViTrox Bhd has no effect on the direction of Hibiscus Petroleum i.e., Hibiscus Petroleum and ViTrox Bhd go up and down completely randomly.

Pair Corralation between Hibiscus Petroleum and ViTrox Bhd

Assuming the 90 days trading horizon Hibiscus Petroleum BHD is expected to under-perform the ViTrox Bhd. But the stock apears to be less risky and, when comparing its historical volatility, Hibiscus Petroleum BHD is 1.79 times less risky than ViTrox Bhd. The stock trades about -0.03 of its potential returns per unit of risk. The ViTrox Bhd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  351.00  in ViTrox Bhd on October 25, 2024 and sell it today you would earn a total of  60.00  from holding ViTrox Bhd or generate 17.09% return on investment over 90 days.

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

Hibiscus Petroleum BHD  vs.  ViTrox Bhd

Hibiscus Petroleum BHD

Risk-Adjusted Performance

0 of 100

Very Weak

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

ViTrox Bhd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ViTrox Bhd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ViTrox Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hibiscus Petroleum and ViTrox Bhd

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

The idea behind Hibiscus Petroleum BHD and ViTrox Bhd 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.