Correlation Between Petrolimex International and CMC Corp

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

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

Diversification Opportunities for Petrolimex International and CMC Corp

-0.26

Correlation Coefficient

Petrolimex International  CMC Corp

Very good diversification

The 3 months correlation between Petrolimex and CMC is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex International Tradi and CMC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Corp and Petrolimex International 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 International Trading are associated (or correlated) with CMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Corp has no effect on the direction of Petrolimex International i.e., Petrolimex International and CMC Corp go up and down completely randomly.

Pair Corralation between Petrolimex International and CMC Corp

Assuming the 90 days trading horizon Petrolimex International Trading is expected to generate 0.45 times more return on investment than CMC Corp. However, Petrolimex International Trading is 2.24 times less risky than CMC Corp. It trades about 0.11 of its potential returns per unit of risk. CMC Corp is currently generating about -0.23 per unit of risk. If you would invest  530,000  in Petrolimex International Trading on October 8, 2024 and sell it today you would earn a total of  14,000  from holding Petrolimex International Trading or generate 2.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Petrolimex International Tradi  vs.  CMC Corp

Petrolimex International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex International Trading are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Petrolimex International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CMC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, CMC Corp 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 International and CMC Corp

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

The idea behind Petrolimex International Trading and CMC Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.