Correlation Between Petrolimex International and Construction JSC

Can any of the company-specific risk be diversified away by investing in both Petrolimex International and Construction 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 International and Construction JSC 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 Construction JSC No5, you can compare the effects of market volatilities on Petrolimex International and Construction 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 International with a short position of Construction JSC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrolimex International and Construction JSC.

Diversification Opportunities for Petrolimex International and Construction JSC

0.45

Correlation Coefficient

Petrolimex International  Construction JSC

Very weak diversification

The 3 months correlation between Petrolimex and Construction is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex International Tradi and Construction JSC No5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction JSC No5 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 Construction JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction JSC No5 has no effect on the direction of Petrolimex International i.e., Petrolimex International and Construction JSC go up and down completely randomly.

Pair Corralation between Petrolimex International and Construction JSC

Assuming the 90 days trading horizon Petrolimex International is expected to generate 7.4 times less return on investment than Construction JSC. But when comparing it to its historical volatility, Petrolimex International Trading is 2.45 times less risky than Construction JSC. It trades about 0.11 of its potential returns per unit of risk. Construction JSC No5 is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  2,000,000  in Construction JSC No5 on October 10, 2024 and sell it today you would earn a total of  200,000  from holding Construction JSC No5 or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.63%
Values	Daily Returns

Petrolimex International Tradi  vs.  Construction JSC No5

Petrolimex International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex International Trading are ranked lower than 2 (%) 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.

Construction JSC No5

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Construction JSC No5 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Construction JSC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petrolimex International and Construction JSC

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

The idea behind Petrolimex International Trading and Construction JSC No5 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.