Correlation Between Paramount Communications and IG Petrochemicals
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By analyzing existing cross correlation between Paramount Communications Limited and IG Petrochemicals Limited, you can compare the effects of market volatilities on Paramount Communications and IG Petrochemicals 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 Paramount Communications with a short position of IG Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Communications and IG Petrochemicals.
Diversification Opportunities for Paramount Communications and IG Petrochemicals
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Paramount and IGPL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Communications Limit and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals and Paramount Communications 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 Paramount Communications Limited are associated (or correlated) with IG Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IG Petrochemicals has no effect on the direction of Paramount Communications i.e., Paramount Communications and IG Petrochemicals go up and down completely randomly.
Pair Corralation between Paramount Communications and IG Petrochemicals
Assuming the 90 days trading horizon Paramount Communications Limited is expected to generate 1.0 times more return on investment than IG Petrochemicals. However, Paramount Communications is 1.0 times more volatile than IG Petrochemicals Limited. It trades about 0.37 of its potential returns per unit of risk. IG Petrochemicals Limited is currently generating about 0.0 per unit of risk. If you would invest 6,822 in Paramount Communications Limited on September 24, 2024 and sell it today you would earn a total of 1,716 from holding Paramount Communications Limited or generate 25.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Paramount Communications Limit vs. IG Petrochemicals Limited
Performance |
Timeline |
Paramount Communications |
IG Petrochemicals |
Paramount Communications and IG Petrochemicals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Paramount Communications and IG Petrochemicals
The main advantage of trading using opposite Paramount Communications and IG Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Communications position performs unexpectedly, IG Petrochemicals 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 IG Petrochemicals will offset losses from the drop in IG Petrochemicals' long position.The idea behind Paramount Communications Limited and IG Petrochemicals Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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