Correlation Between Mari Petroleum and Sitara Chemical

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

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

Diversification Opportunities for Mari Petroleum and Sitara Chemical

0.75

Correlation Coefficient

Mari Petroleum  Sitara Chemical

Poor diversification

The 3 months correlation between Mari and Sitara is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mari Petroleum and Sitara Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitara Chemical Indu 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 Sitara Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitara Chemical Indu has no effect on the direction of Mari Petroleum i.e., Mari Petroleum and Sitara Chemical go up and down completely randomly.

Pair Corralation between Mari Petroleum and Sitara Chemical

Assuming the 90 days trading horizon Mari Petroleum is expected to generate 2.96 times less return on investment than Sitara Chemical. In addition to that, Mari Petroleum is 1.34 times more volatile than Sitara Chemical Industries. It trades about 0.1 of its total potential returns per unit of risk. Sitara Chemical Industries is currently generating about 0.38 per unit of volatility. If you would invest  28,496  in Sitara Chemical Industries on October 20, 2024 and sell it today you would earn a total of  4,504  from holding Sitara Chemical Industries or generate 15.81% return on investment over 90 days.

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

Mari Petroleum  vs.  Sitara Chemical Industries

Mari Petroleum

Risk-Adjusted Performance

15 of 100

Good

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 weak basic indicators, Mari Petroleum sustained solid returns over the last few months and may actually be approaching a breakup point.

Sitara Chemical Indu

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitara Chemical Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sitara Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mari Petroleum and Sitara Chemical

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

The idea behind Mari Petroleum and Sitara Chemical Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.