Correlation Between Petrolimex Petrochemical and Nafoods Group

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

Diversification Opportunities for Petrolimex Petrochemical and Nafoods Group

0.54

Correlation Coefficient

Petrolimex Petrochemical  Nafoods Group

Very weak diversification

The 3 months correlation between Petrolimex and Nafoods is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Petrochemical JSC and Nafoods Group JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nafoods Group 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 Nafoods Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nafoods Group JSC has no effect on the direction of Petrolimex Petrochemical i.e., Petrolimex Petrochemical and Nafoods Group go up and down completely randomly.

Pair Corralation between Petrolimex Petrochemical and Nafoods Group

Assuming the 90 days trading horizon Petrolimex Petrochemical JSC is expected to generate 1.17 times more return on investment than Nafoods Group. However, Petrolimex Petrochemical is 1.17 times more volatile than Nafoods Group JSC. It trades about -0.09 of its potential returns per unit of risk. Nafoods Group JSC is currently generating about -0.13 per unit of risk. If you would invest  2,290,000  in Petrolimex Petrochemical JSC on September 22, 2024 and sell it today you would lose (200,000) from holding Petrolimex Petrochemical JSC or give up 8.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Petrolimex Petrochemical JSC  vs.  Nafoods Group 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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nafoods Group JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nafoods Group JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Nafoods Group 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 Nafoods Group

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

The idea behind Petrolimex Petrochemical JSC and Nafoods Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.