Correlation Between Petrochemical and IBI Mutual

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

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

Diversification Opportunities for Petrochemical and IBI Mutual

-0.47

Correlation Coefficient

Petrochemical  IBI Mutual

Very good diversification

The 3 months correlation between Petrochemical and IBI is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and IBI Mutual Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBI Mutual Funds and 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 Petrochemical are associated (or correlated) with IBI Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBI Mutual Funds has no effect on the direction of Petrochemical i.e., Petrochemical and IBI Mutual go up and down completely randomly.

Pair Corralation between Petrochemical and IBI Mutual

Assuming the 90 days trading horizon Petrochemical is expected to generate 1.59 times more return on investment than IBI Mutual. However, Petrochemical is 1.59 times more volatile than IBI Mutual Funds. It trades about 0.09 of its potential returns per unit of risk. IBI Mutual Funds is currently generating about 0.01 per unit of risk. If you would invest  17,690  in Petrochemical on December 26, 2024 and sell it today you would earn a total of  1,800  from holding Petrochemical or generate 10.18% return on investment over 90 days.

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

Petrochemical  vs.  IBI Mutual Funds

Petrochemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrochemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Petrochemical sustained solid returns over the last few months and may actually be approaching a breakup point.

IBI Mutual Funds

Risk-Adjusted Performance

Weak

Over the last 90 days IBI Mutual Funds has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, IBI Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petrochemical and IBI Mutual

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

The idea behind Petrochemical and IBI Mutual Funds 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.