Correlation Between Petrolimex Petrochemical and Riverway Management

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

Diversification Opportunities for Petrolimex Petrochemical and Riverway Management

-0.09

Correlation Coefficient

Petrolimex Petrochemical  Riverway Management

Good diversification

The 3 months correlation between Petrolimex and Riverway is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Petrochemical JSC and Riverway Management JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverway Management 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 Riverway Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverway Management JSC has no effect on the direction of Petrolimex Petrochemical i.e., Petrolimex Petrochemical and Riverway Management go up and down completely randomly.

Pair Corralation between Petrolimex Petrochemical and Riverway Management

Assuming the 90 days trading horizon Petrolimex Petrochemical JSC is expected to generate 0.83 times more return on investment than Riverway Management. However, Petrolimex Petrochemical JSC is 1.2 times less risky than Riverway Management. It trades about 0.11 of its potential returns per unit of risk. Riverway Management JSC is currently generating about -0.08 per unit of risk. If you would invest  2,240,000  in Petrolimex Petrochemical JSC on October 23, 2024 and sell it today you would earn a total of  340,000  from holding Petrolimex Petrochemical JSC or generate 15.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Petrolimex Petrochemical JSC  vs.  Riverway Management JSC

Petrolimex Petrochemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex Petrochemical JSC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Petrolimex Petrochemical displayed solid returns over the last few months and may actually be approaching a breakup point.

Riverway Management JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riverway Management JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Petrolimex Petrochemical and Riverway Management

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

The idea behind Petrolimex Petrochemical JSC and Riverway Management 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.