Correlation Between Lucky Cement and Mari Petroleum

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

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

Diversification Opportunities for Lucky Cement and Mari Petroleum

0.6

Correlation Coefficient

Lucky Cement  Mari Petroleum

Poor diversification

The 3 months correlation between Lucky and Mari is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lucky Cement and Mari Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mari Petroleum and Lucky Cement 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 Lucky Cement are associated (or correlated) with Mari Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mari Petroleum has no effect on the direction of Lucky Cement i.e., Lucky Cement and Mari Petroleum go up and down completely randomly.

Pair Corralation between Lucky Cement and Mari Petroleum

Assuming the 90 days trading horizon Lucky Cement is expected to generate 2.99 times less return on investment than Mari Petroleum. But when comparing it to its historical volatility, Lucky Cement is 3.85 times less risky than Mari Petroleum. It trades about 0.21 of its potential returns per unit of risk. Mari Petroleum is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  24,609  in Mari Petroleum on September 3, 2024 and sell it today you would earn a total of  21,850  from holding Mari Petroleum or generate 88.79% return on investment over 90 days.

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

Lucky Cement  vs.  Mari Petroleum

Lucky Cement

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lucky Cement are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Lucky Cement sustained solid returns over the last few months and may actually be approaching a breakup point.

Mari Petroleum

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mari Petroleum are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mari Petroleum sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucky Cement and Mari Petroleum

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

The idea behind Lucky Cement and Mari Petroleum 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.