Correlation Between Mecanica and Rompetrol Well

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

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

Diversification Opportunities for Mecanica and Rompetrol Well

0.27

Correlation Coefficient

Mecanica  Rompetrol Well

Modest diversification

The 3 months correlation between Mecanica and Rompetrol is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mecanica Sa Ce and Rompetrol Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rompetrol Well and Mecanica 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 Mecanica Sa Ce are associated (or correlated) with Rompetrol Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rompetrol Well has no effect on the direction of Mecanica i.e., Mecanica and Rompetrol Well go up and down completely randomly.

Pair Corralation between Mecanica and Rompetrol Well

Assuming the 90 days trading horizon Mecanica Sa Ce is expected to under-perform the Rompetrol Well. In addition to that, Mecanica is 2.5 times more volatile than Rompetrol Well. It trades about -0.01 of its total potential returns per unit of risk. Rompetrol Well is currently generating about -0.01 per unit of volatility. If you would invest  60.00  in Rompetrol Well on September 12, 2024 and sell it today you would lose (1.00) from holding Rompetrol Well or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Mecanica Sa Ce  vs.  Rompetrol Well

Mecanica Sa Ce

Risk-Adjusted Performance

0 of 100

Very Weak

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

Rompetrol Well

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mecanica and Rompetrol Well

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

The idea behind Mecanica Sa Ce and Rompetrol Well 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.