Correlation Between Materials Petroleum and Investment

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

Diversification Opportunities for Materials Petroleum and Investment

-0.2
  Correlation Coefficient

Good diversification

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

Pair Corralation between Materials Petroleum and Investment

Assuming the 90 days trading horizon Materials Petroleum JSC is expected to under-perform the Investment. In addition to that, Materials Petroleum is 2.84 times more volatile than Investment and Industrial. It trades about -0.01 of its total potential returns per unit of risk. Investment and Industrial is currently generating about 0.04 per unit of volatility. If you would invest  6,560,000  in Investment and Industrial on October 25, 2024 and sell it today you would earn a total of  180,000  from holding Investment and Industrial or generate 2.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy69.84%
ValuesDaily Returns

Materials Petroleum JSC  vs.  Investment and Industrial

 Performance 
       Timeline  
Materials Petroleum JSC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Materials Petroleum JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Materials Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Investment and Industrial 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Investment and Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Materials Petroleum and Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Materials Petroleum and Investment

The main advantage of trading using opposite Materials Petroleum and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Petroleum position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment's long position.
The idea behind Materials Petroleum JSC and Investment and Industrial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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