Correlation Between Elcom Technology and Petrolimex Information

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

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

Diversification Opportunities for Elcom Technology and Petrolimex Information

-0.55

Correlation Coefficient

Elcom Technology  Petrolimex Information

Excellent diversification

The 3 months correlation between Elcom and Petrolimex is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Elcom Technology Communication and Petrolimex Information Technol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Information and Elcom Technology 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 Elcom Technology Communications are associated (or correlated) with Petrolimex Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Information has no effect on the direction of Elcom Technology i.e., Elcom Technology and Petrolimex Information go up and down completely randomly.

Pair Corralation between Elcom Technology and Petrolimex Information

Assuming the 90 days trading horizon Elcom Technology Communications is expected to under-perform the Petrolimex Information. In addition to that, Elcom Technology is 1.01 times more volatile than Petrolimex Information Technology. It trades about -0.04 of its total potential returns per unit of risk. Petrolimex Information Technology is currently generating about 0.13 per unit of volatility. If you would invest  2,720,000  in Petrolimex Information Technology on December 28, 2024 and sell it today you would earn a total of  250,000  from holding Petrolimex Information Technology or generate 9.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	51.72%
Values	Daily Returns

Elcom Technology Communication  vs.  Petrolimex Information Technol

Elcom Technology Com

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elcom Technology Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Petrolimex Information

Risk-Adjusted Performance

OK

Over the last 90 days Petrolimex Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Petrolimex Information displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elcom Technology and Petrolimex Information

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

The idea behind Elcom Technology Communications and Petrolimex Information Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.