Correlation Between Sao Ta and Petrolimex International

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

By analyzing existing cross correlation between Sao Ta Foods and Petrolimex International Trading, you can compare the effects of market volatilities on Sao Ta and Petrolimex International 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 Sao Ta with a short position of Petrolimex International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Ta and Petrolimex International.

Diversification Opportunities for Sao Ta and Petrolimex International

0.32

Correlation Coefficient

Sao Ta  Petrolimex International

Weak diversification

The 3 months correlation between Sao and Petrolimex is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and Petrolimex International Tradi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex International and Sao Ta 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 Sao Ta Foods are associated (or correlated) with Petrolimex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex International has no effect on the direction of Sao Ta i.e., Sao Ta and Petrolimex International go up and down completely randomly.

Pair Corralation between Sao Ta and Petrolimex International

Assuming the 90 days trading horizon Sao Ta Foods is expected to under-perform the Petrolimex International. But the stock apears to be less risky and, when comparing its historical volatility, Sao Ta Foods is 1.59 times less risky than Petrolimex International. The stock trades about -0.3 of its potential returns per unit of risk. The Petrolimex International Trading is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  530,000  in Petrolimex International Trading on October 10, 2024 and sell it today you would earn a total of  13,000  from holding Petrolimex International Trading or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Sao Ta Foods  vs.  Petrolimex International Tradi

Sao Ta Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Petrolimex International

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Sao Ta and Petrolimex International

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

The idea behind Sao Ta Foods and Petrolimex International Trading 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.