Correlation Between FIT INVEST and Petrolimex Petrochemical

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

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

Diversification Opportunities for FIT INVEST and Petrolimex Petrochemical

0.41

Correlation Coefficient

FIT INVEST  Petrolimex Petrochemical

Very weak diversification

The 3 months correlation between FIT and Petrolimex is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding FIT INVEST JSC and Petrolimex Petrochemical JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Petrochemical and FIT INVEST 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 FIT INVEST JSC are associated (or correlated) with Petrolimex Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Petrochemical has no effect on the direction of FIT INVEST i.e., FIT INVEST and Petrolimex Petrochemical go up and down completely randomly.

Pair Corralation between FIT INVEST and Petrolimex Petrochemical

Assuming the 90 days trading horizon FIT INVEST JSC is expected to generate 0.8 times more return on investment than Petrolimex Petrochemical. However, FIT INVEST JSC is 1.25 times less risky than Petrolimex Petrochemical. It trades about 0.03 of its potential returns per unit of risk. Petrolimex Petrochemical JSC is currently generating about -0.09 per unit of risk. If you would invest  419,000  in FIT INVEST JSC on September 15, 2024 and sell it today you would earn a total of  9,000  from holding FIT INVEST JSC or generate 2.15% return on investment over 90 days.

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

FIT INVEST JSC  vs.  Petrolimex Petrochemical JSC

FIT INVEST JSC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FIT INVEST JSC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, FIT INVEST is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Petrolimex Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrolimex Petrochemical JSC 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.

Pair Trading with FIT INVEST and Petrolimex Petrochemical

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

The idea behind FIT INVEST JSC and Petrolimex Petrochemical JSC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.