Correlation Between Petrolimex Petrochemical and FPT Digital

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

Diversification Opportunities for Petrolimex Petrochemical and FPT Digital

0.06

Correlation Coefficient

Petrolimex Petrochemical  FPT Digital

Significant diversification

The 3 months correlation between Petrolimex and FPT is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Petrochemical JSC and FPT Digital Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPT Digital Retail 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 FPT Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPT Digital Retail has no effect on the direction of Petrolimex Petrochemical i.e., Petrolimex Petrochemical and FPT Digital go up and down completely randomly.

Pair Corralation between Petrolimex Petrochemical and FPT Digital

Assuming the 90 days trading horizon Petrolimex Petrochemical JSC is expected to generate 1.41 times more return on investment than FPT Digital. However, Petrolimex Petrochemical is 1.41 times more volatile than FPT Digital Retail. It trades about 0.14 of its potential returns per unit of risk. FPT Digital Retail is currently generating about -0.04 per unit of risk. If you would invest  2,100,000  in Petrolimex Petrochemical JSC on December 22, 2024 and sell it today you would earn a total of  370,000  from holding Petrolimex Petrochemical JSC or generate 17.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Petrolimex Petrochemical JSC  vs.  FPT Digital Retail

Petrolimex Petrochemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex Petrochemical JSC are ranked lower than 10 (%) 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.

FPT Digital Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days FPT Digital Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FPT Digital 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 FPT Digital

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

The idea behind Petrolimex Petrochemical JSC and FPT Digital Retail 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.