Correlation Between Mari Petroleum and National Refinery

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

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

Diversification Opportunities for Mari Petroleum and National Refinery

0.87

Correlation Coefficient

Mari Petroleum  National Refinery

Very poor diversification

The 3 months correlation between Mari and National is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mari Petroleum and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Mari Petroleum i.e., Mari Petroleum and National Refinery go up and down completely randomly.

Pair Corralation between Mari Petroleum and National Refinery

Assuming the 90 days trading horizon Mari Petroleum is expected to generate 1.2 times more return on investment than National Refinery. However, Mari Petroleum is 1.2 times more volatile than National Refinery. It trades about -0.01 of its potential returns per unit of risk. National Refinery is currently generating about -0.07 per unit of risk. If you would invest  71,882  in Mari Petroleum on December 30, 2024 and sell it today you would lose (3,466) from holding Mari Petroleum or give up 4.82% of portfolio value over 90 days.

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

Mari Petroleum  vs.  National Refinery

Mari Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mari Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mari Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

National Refinery

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Refinery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Mari Petroleum and National Refinery

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

The idea behind Mari Petroleum and National Refinery 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.