Correlation Between Millat Tractors and Mari Petroleum

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

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

Diversification Opportunities for Millat Tractors and Mari Petroleum

0.78

Correlation Coefficient

Millat Tractors  Mari Petroleum

Poor diversification

The 3 months correlation between Millat and Mari is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Millat Tractors and Mari Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mari Petroleum and Millat Tractors 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 Millat Tractors 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 Millat Tractors i.e., Millat Tractors and Mari Petroleum go up and down completely randomly.

Pair Corralation between Millat Tractors and Mari Petroleum

Assuming the 90 days trading horizon Millat Tractors is expected to generate 0.92 times more return on investment than Mari Petroleum. However, Millat Tractors is 1.08 times less risky than Mari Petroleum. It trades about 0.12 of its potential returns per unit of risk. Mari Petroleum is currently generating about -0.32 per unit of risk. If you would invest  62,760  in Millat Tractors on October 15, 2024 and sell it today you would earn a total of  5,469  from holding Millat Tractors or generate 8.71% return on investment over 90 days.

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

Millat Tractors  vs.  Mari Petroleum

Millat Tractors

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Millat Tractors reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Millat Tractors and Mari Petroleum

The main advantage of trading using opposite Millat Tractors and Mari Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Millat Tractors 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 Millat Tractors 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.