Correlation Between Paint Chemicals and Suez Canal

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

By analyzing existing cross correlation between Paint Chemicals Industries and Suez Canal Bank, you can compare the effects of market volatilities on Paint Chemicals and Suez Canal 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 Paint Chemicals with a short position of Suez Canal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paint Chemicals and Suez Canal.

Diversification Opportunities for Paint Chemicals and Suez Canal

0.0

Correlation Coefficient

Paint Chemicals  Suez Canal

Pay attention - limited upside

The 3 months correlation between Paint and Suez is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Paint Chemicals Industries and Suez Canal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suez Canal Bank and Paint Chemicals 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 Paint Chemicals Industries are associated (or correlated) with Suez Canal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suez Canal Bank has no effect on the direction of Paint Chemicals i.e., Paint Chemicals and Suez Canal go up and down completely randomly.

Pair Corralation between Paint Chemicals and Suez Canal

Assuming the 90 days trading horizon Paint Chemicals is expected to generate 3.15 times less return on investment than Suez Canal. But when comparing it to its historical volatility, Paint Chemicals Industries is 3.78 times less risky than Suez Canal. It trades about 0.08 of its potential returns per unit of risk. Suez Canal Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,061  in Suez Canal Bank on October 3, 2024 and sell it today you would earn a total of  1,194  from holding Suez Canal Bank or generate 112.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Paint Chemicals Industries  vs.  Suez Canal Bank

Paint Chemicals Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paint Chemicals Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Paint Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Suez Canal Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suez Canal Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Suez Canal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paint Chemicals and Suez Canal

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

The idea behind Paint Chemicals Industries and Suez Canal Bank 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.