Correlation Between Alarko Holding and Petkim Petrokimya

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

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

Diversification Opportunities for Alarko Holding and Petkim Petrokimya

0.8

Correlation Coefficient

Alarko Holding  Petkim Petrokimya

Very poor diversification

The 3 months correlation between Alarko and Petkim is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alarko Holding AS and Petkim Petrokimya Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petkim Petrokimya Holding and Alarko Holding 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 Alarko Holding AS are associated (or correlated) with Petkim Petrokimya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petkim Petrokimya Holding has no effect on the direction of Alarko Holding i.e., Alarko Holding and Petkim Petrokimya go up and down completely randomly.

Pair Corralation between Alarko Holding and Petkim Petrokimya

Assuming the 90 days trading horizon Alarko Holding AS is expected to generate 1.34 times more return on investment than Petkim Petrokimya. However, Alarko Holding is 1.34 times more volatile than Petkim Petrokimya Holding. It trades about -0.03 of its potential returns per unit of risk. Petkim Petrokimya Holding is currently generating about -0.1 per unit of risk. If you would invest  9,165  in Alarko Holding AS on December 25, 2024 and sell it today you would lose (555.00) from holding Alarko Holding AS or give up 6.06% of portfolio value over 90 days.

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

Alarko Holding AS  vs.  Petkim Petrokimya Holding

Alarko Holding AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alarko Holding AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Alarko Holding is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Petkim Petrokimya Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petkim Petrokimya Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Alarko Holding and Petkim Petrokimya

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

The idea behind Alarko Holding AS and Petkim Petrokimya Holding 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.