Correlation Between Pato Chemical and Eternal Energy

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

By analyzing existing cross correlation between Pato Chemical Industry and Eternal Energy Public, you can compare the effects of market volatilities on Pato Chemical and Eternal Energy 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 Pato Chemical with a short position of Eternal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pato Chemical and Eternal Energy.

Diversification Opportunities for Pato Chemical and Eternal Energy

-0.55

Correlation Coefficient

Pato Chemical  Eternal Energy

Excellent diversification

The 3 months correlation between Pato and Eternal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pato Chemical Industry and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy Public and Pato Chemical 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 Pato Chemical Industry are associated (or correlated) with Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of Pato Chemical i.e., Pato Chemical and Eternal Energy go up and down completely randomly.

Pair Corralation between Pato Chemical and Eternal Energy

Assuming the 90 days trading horizon Pato Chemical Industry is expected to under-perform the Eternal Energy. But the stock apears to be less risky and, when comparing its historical volatility, Pato Chemical Industry is 12.07 times less risky than Eternal Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Eternal Energy Public is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Eternal Energy Public on December 1, 2024 and sell it today you would earn a total of  26.00  from holding Eternal Energy Public or generate 108.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pato Chemical Industry  vs.  Eternal Energy Public

Pato Chemical Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pato Chemical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Pato Chemical is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Eternal Energy Public

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pato Chemical and Eternal Energy

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

The idea behind Pato Chemical Industry and Eternal Energy Public 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.