Correlation Between Petrolimex Petrochemical and PVI Reinsurance

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

Diversification Opportunities for Petrolimex Petrochemical and PVI Reinsurance

-0.38

Correlation Coefficient

Petrolimex Petrochemical  PVI Reinsurance

Very good diversification

The 3 months correlation between Petrolimex and PVI is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Petrochemical JSC and PVI Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVI Reinsurance Corp 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 PVI Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVI Reinsurance Corp has no effect on the direction of Petrolimex Petrochemical i.e., Petrolimex Petrochemical and PVI Reinsurance go up and down completely randomly.

Pair Corralation between Petrolimex Petrochemical and PVI Reinsurance

Assuming the 90 days trading horizon Petrolimex Petrochemical is expected to generate 1.67 times less return on investment than PVI Reinsurance. But when comparing it to its historical volatility, Petrolimex Petrochemical JSC is 1.55 times less risky than PVI Reinsurance. It trades about 0.08 of its potential returns per unit of risk. PVI Reinsurance Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,900,000  in PVI Reinsurance Corp on September 21, 2024 and sell it today you would earn a total of  80,000  from holding PVI Reinsurance Corp or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Petrolimex Petrochemical JSC  vs.  PVI Reinsurance Corp

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.

PVI Reinsurance Corp

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PVI Reinsurance Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, PVI Reinsurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petrolimex Petrochemical and PVI Reinsurance

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

The idea behind Petrolimex Petrochemical JSC and PVI Reinsurance Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.