Correlation Between Petrolimex Insurance and Idico JSC

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

By analyzing existing cross correlation between Petrolimex Insurance Corp and Idico JSC, you can compare the effects of market volatilities on Petrolimex Insurance and Idico JSC 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 Petrolimex Insurance with a short position of Idico JSC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrolimex Insurance and Idico JSC.

Diversification Opportunities for Petrolimex Insurance and Idico JSC

-0.08

Correlation Coefficient

Petrolimex Insurance  Idico JSC

Good diversification

The 3 months correlation between Petrolimex and Idico is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Insurance Corp and Idico JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idico JSC and Petrolimex Insurance 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 Petrolimex Insurance Corp are associated (or correlated) with Idico JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idico JSC has no effect on the direction of Petrolimex Insurance i.e., Petrolimex Insurance and Idico JSC go up and down completely randomly.

Pair Corralation between Petrolimex Insurance and Idico JSC

Assuming the 90 days trading horizon Petrolimex Insurance Corp is expected to generate 3.35 times more return on investment than Idico JSC. However, Petrolimex Insurance is 3.35 times more volatile than Idico JSC. It trades about 0.09 of its potential returns per unit of risk. Idico JSC is currently generating about -0.07 per unit of risk. If you would invest  2,160,000  in Petrolimex Insurance Corp on December 28, 2024 and sell it today you would earn a total of  190,000  from holding Petrolimex Insurance Corp or generate 8.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.32%
Values	Daily Returns

Petrolimex Insurance Corp  vs.  Idico JSC

Petrolimex Insurance Corp

Risk-Adjusted Performance

Modest

Over the last 90 days Petrolimex Insurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating forward indicators, Petrolimex Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Idico JSC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Petrolimex Insurance and Idico JSC

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

The idea behind Petrolimex Insurance Corp and Idico JSC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.