Correlation Between Petrochemical and Rami Levi

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

By analyzing existing cross correlation between Petrochemical and Rami Levi, you can compare the effects of market volatilities on Petrochemical and Rami Levi 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 Rami Levi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrochemical and Rami Levi.

Diversification Opportunities for Petrochemical and Rami Levi

0.82

Correlation Coefficient

Petrochemical  Rami Levi

Very poor diversification

The 3 months correlation between Petrochemical and Rami is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and Rami Levi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rami Levi 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 Rami Levi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rami Levi has no effect on the direction of Petrochemical i.e., Petrochemical and Rami Levi go up and down completely randomly.

Pair Corralation between Petrochemical and Rami Levi

Assuming the 90 days trading horizon Petrochemical is expected to generate 6.06 times less return on investment than Rami Levi. In addition to that, Petrochemical is 1.33 times more volatile than Rami Levi. It trades about 0.02 of its total potential returns per unit of risk. Rami Levi is currently generating about 0.14 per unit of volatility. If you would invest  2,548,000  in Rami Levi on November 28, 2024 and sell it today you would earn a total of  107,000  from holding Rami Levi or generate 4.2% return on investment over 90 days.

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

Petrochemical  vs.  Rami Levi

Petrochemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrochemical are ranked lower than 8 (%) 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.

Rami Levi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rami Levi are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rami Levi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petrochemical and Rami Levi

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

The idea behind Petrochemical and Rami Levi 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.