Correlation Between Petrolimex International and Long Giang

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

Diversification Opportunities for Petrolimex International and Long Giang

0.05

Correlation Coefficient

Petrolimex International  Long Giang

Significant diversification

The 3 months correlation between Petrolimex and Long is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex International Tradi and Long Giang Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Giang Investment 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 Long Giang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Giang Investment has no effect on the direction of Petrolimex International i.e., Petrolimex International and Long Giang go up and down completely randomly.

Pair Corralation between Petrolimex International and Long Giang

Assuming the 90 days trading horizon Petrolimex International Trading is expected to generate 1.66 times more return on investment than Long Giang. However, Petrolimex International is 1.66 times more volatile than Long Giang Investment. It trades about 0.06 of its potential returns per unit of risk. Long Giang Investment is currently generating about -0.03 per unit of risk. If you would invest  502,000  in Petrolimex International Trading on October 26, 2024 and sell it today you would earn a total of  33,000  from holding Petrolimex International Trading or generate 6.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Petrolimex International Tradi  vs.  Long Giang Investment

Petrolimex International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex International Trading are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Petrolimex International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Long Giang Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Giang Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Long Giang 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 Long Giang

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

The idea behind Petrolimex International Trading and Long Giang Investment 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.