Correlation Between IDJ FINANCIAL and Petrolimex Information

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

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

Diversification Opportunities for IDJ FINANCIAL and Petrolimex Information

0.75

Correlation Coefficient

IDJ FINANCIAL  Petrolimex Information

Poor diversification

The 3 months correlation between IDJ and Petrolimex is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding IDJ FINANCIAL and Petrolimex Information Technol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Information and IDJ FINANCIAL 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 IDJ FINANCIAL 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 IDJ FINANCIAL i.e., IDJ FINANCIAL and Petrolimex Information go up and down completely randomly.

Pair Corralation between IDJ FINANCIAL and Petrolimex Information

Assuming the 90 days trading horizon IDJ FINANCIAL is expected to generate 0.71 times more return on investment than Petrolimex Information. However, IDJ FINANCIAL is 1.4 times less risky than Petrolimex Information. It trades about -0.03 of its potential returns per unit of risk. Petrolimex Information Technology is currently generating about -0.06 per unit of risk. If you would invest  640,000  in IDJ FINANCIAL on September 16, 2024 and sell it today you would lose (30,000) from holding IDJ FINANCIAL or give up 4.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	72.31%
Values	Daily Returns

IDJ FINANCIAL  vs.  Petrolimex Information Technol

IDJ FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Petrolimex Information

Risk-Adjusted Performance

0 of 100

Very Weak

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 latest unfluctuating performance, the Stock's basic 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 IDJ FINANCIAL and Petrolimex Information

The main advantage of trading using opposite IDJ FINANCIAL and Petrolimex Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDJ FINANCIAL 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 IDJ FINANCIAL 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.