Correlation Between Petrolimex Petrochemical and Materials Petroleum

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

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

Diversification Opportunities for Petrolimex Petrochemical and Materials Petroleum

-0.23

Correlation Coefficient

Petrolimex Petrochemical  Materials Petroleum

Very good diversification

The 3 months correlation between Petrolimex and Materials is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Petrochemical JSC and Materials Petroleum JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Petroleum JSC and Petrolimex Petrochemical 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 Petrochemical JSC are associated (or correlated) with Materials Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Petroleum JSC has no effect on the direction of Petrolimex Petrochemical i.e., Petrolimex Petrochemical and Materials Petroleum go up and down completely randomly.

Pair Corralation between Petrolimex Petrochemical and Materials Petroleum

Assuming the 90 days trading horizon Petrolimex Petrochemical JSC is expected to generate 0.63 times more return on investment than Materials Petroleum. However, Petrolimex Petrochemical JSC is 1.58 times less risky than Materials Petroleum. It trades about 0.08 of its potential returns per unit of risk. Materials Petroleum JSC is currently generating about -0.01 per unit of risk. If you would invest  2,030,000  in Petrolimex Petrochemical JSC on October 6, 2024 and sell it today you would earn a total of  160,000  from holding Petrolimex Petrochemical JSC or generate 7.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.77%
Values	Daily Returns

Petrolimex Petrochemical JSC  vs.  Materials Petroleum JSC

Petrolimex Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrolimex Petrochemical JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Petroleum JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Materials Petroleum 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 Petrochemical and Materials Petroleum

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

The idea behind Petrolimex Petrochemical JSC and Materials Petroleum 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.