Correlation Between HVC Investment and Petrolimex International

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

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

Diversification Opportunities for HVC Investment and Petrolimex International

0.64

Correlation Coefficient

HVC Investment  Petrolimex International

Poor diversification

The 3 months correlation between HVC and Petrolimex is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HVC Investment and and Petrolimex International Tradi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex International and HVC Investment 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 HVC Investment and 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 HVC Investment i.e., HVC Investment and Petrolimex International go up and down completely randomly.

Pair Corralation between HVC Investment and Petrolimex International

Assuming the 90 days trading horizon HVC Investment and is expected to under-perform the Petrolimex International. In addition to that, HVC Investment is 2.62 times more volatile than Petrolimex International Trading. It trades about -0.03 of its total potential returns per unit of risk. Petrolimex International Trading is currently generating about -0.07 per unit of volatility. If you would invest  548,000  in Petrolimex International Trading on October 22, 2024 and sell it today you would lose (8,000) from holding Petrolimex International Trading or give up 1.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

HVC Investment and  vs.  Petrolimex International Tradi

HVC Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HVC Investment and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, HVC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Petrolimex International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex International Trading are ranked lower than 3 (%) 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 HVC Investment and Petrolimex International

The main advantage of trading using opposite HVC Investment and Petrolimex International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HVC Investment 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 HVC Investment and 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.