Correlation Between Mari Petroleum and Clover Pakistan

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

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

Diversification Opportunities for Mari Petroleum and Clover Pakistan

0.79

Correlation Coefficient

Mari Petroleum  Clover Pakistan

Poor diversification

The 3 months correlation between Mari and Clover is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mari Petroleum and Clover Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clover Pakistan and Mari Petroleum 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 Mari Petroleum are associated (or correlated) with Clover Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clover Pakistan has no effect on the direction of Mari Petroleum i.e., Mari Petroleum and Clover Pakistan go up and down completely randomly.

Pair Corralation between Mari Petroleum and Clover Pakistan

Assuming the 90 days trading horizon Mari Petroleum is expected to under-perform the Clover Pakistan. But the stock apears to be less risky and, when comparing its historical volatility, Mari Petroleum is 1.04 times less risky than Clover Pakistan. The stock trades about -0.32 of its potential returns per unit of risk. The Clover Pakistan is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,038  in Clover Pakistan on October 15, 2024 and sell it today you would lose (40.00) from holding Clover Pakistan or give up 0.79% of portfolio value over 90 days.

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

Mari Petroleum  vs.  Clover Pakistan

Mari Petroleum

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mari Petroleum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Mari Petroleum sustained solid returns over the last few months and may actually be approaching a breakup point.

Clover Pakistan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Pakistan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Pakistan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mari Petroleum and Clover Pakistan

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

The idea behind Mari Petroleum and Clover Pakistan 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.