Correlation Between Iproeb SA and Rompetrol Rafi

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

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

Diversification Opportunities for Iproeb SA and Rompetrol Rafi

0.61

Correlation Coefficient

Iproeb SA  Rompetrol Rafi

Poor diversification

The 3 months correlation between Iproeb and Rompetrol is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Iproeb SA and Rompetrol Rafi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rompetrol Rafi and Iproeb SA 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 Iproeb SA are associated (or correlated) with Rompetrol Rafi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rompetrol Rafi has no effect on the direction of Iproeb SA i.e., Iproeb SA and Rompetrol Rafi go up and down completely randomly.

Pair Corralation between Iproeb SA and Rompetrol Rafi

Assuming the 90 days trading horizon Iproeb SA is expected to under-perform the Rompetrol Rafi. In addition to that, Iproeb SA is 1.18 times more volatile than Rompetrol Rafi. It trades about -0.5 of its total potential returns per unit of risk. Rompetrol Rafi is currently generating about -0.13 per unit of volatility. If you would invest  7.15  in Rompetrol Rafi on October 15, 2024 and sell it today you would lose (0.20) from holding Rompetrol Rafi or give up 2.8% of portfolio value over 90 days.

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

Iproeb SA  vs.  Rompetrol Rafi

Iproeb SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iproeb SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Rompetrol Rafi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Iproeb SA and Rompetrol Rafi

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

The idea behind Iproeb SA and Rompetrol Rafi 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.