Correlation Between Petrolimex Insurance and SMC Investment

Can any of the company-specific risk be diversified away by investing in both Petrolimex Insurance and SMC Investment 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 SMC Investment 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 SMC Investment Trading, you can compare the effects of market volatilities on Petrolimex Insurance and SMC Investment 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 SMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrolimex Insurance and SMC Investment.

Diversification Opportunities for Petrolimex Insurance and SMC Investment

0.39

Correlation Coefficient

Petrolimex Insurance  SMC Investment

Weak diversification

The 3 months correlation between Petrolimex and SMC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Insurance Corp and SMC Investment Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Investment Trading 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 SMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Investment Trading has no effect on the direction of Petrolimex Insurance i.e., Petrolimex Insurance and SMC Investment go up and down completely randomly.

Pair Corralation between Petrolimex Insurance and SMC Investment

Assuming the 90 days trading horizon Petrolimex Insurance is expected to generate 22.81 times less return on investment than SMC Investment. But when comparing it to its historical volatility, Petrolimex Insurance Corp is 1.38 times less risky than SMC Investment. It trades about 0.0 of its potential returns per unit of risk. SMC Investment Trading is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  753,000  in SMC Investment Trading on September 22, 2024 and sell it today you would earn a total of  51,000  from holding SMC Investment Trading or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.45%
Values	Daily Returns

Petrolimex Insurance Corp  vs.  SMC Investment Trading

Petrolimex Insurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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 healthy forward indicators, Petrolimex Insurance is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SMC Investment Trading

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petrolimex Insurance and SMC Investment

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

The idea behind Petrolimex Insurance Corp and SMC Investment Trading 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.