Correlation Between Hotis Othon and Refinaria

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

By analyzing existing cross correlation between Hotis Othon SA and Refinaria de Petrleos, you can compare the effects of market volatilities on Hotis Othon and Refinaria 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 Hotis Othon with a short position of Refinaria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotis Othon and Refinaria.

Diversification Opportunities for Hotis Othon and Refinaria

-0.84

Correlation Coefficient

Hotis Othon  Refinaria

Pay attention - limited upside

The 3 months correlation between Hotis and Refinaria is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hotis Othon SA and Refinaria de Petrleos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refinaria de Petrleos and Hotis Othon 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 Hotis Othon SA are associated (or correlated) with Refinaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Refinaria de Petrleos has no effect on the direction of Hotis Othon i.e., Hotis Othon and Refinaria go up and down completely randomly.

Pair Corralation between Hotis Othon and Refinaria

Assuming the 90 days trading horizon Hotis Othon SA is expected to generate 0.78 times more return on investment than Refinaria. However, Hotis Othon SA is 1.28 times less risky than Refinaria. It trades about 0.06 of its potential returns per unit of risk. Refinaria de Petrleos is currently generating about -0.08 per unit of risk. If you would invest  225.00  in Hotis Othon SA on September 13, 2024 and sell it today you would earn a total of  18.00  from holding Hotis Othon SA or generate 8.0% return on investment over 90 days.

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

Hotis Othon SA  vs.  Refinaria de Petrleos

Hotis Othon SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hotis Othon SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hotis Othon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Refinaria de Petrleos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Refinaria de Petrleos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hotis Othon and Refinaria

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

The idea behind Hotis Othon SA and Refinaria de Petrleos 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.