Correlation Between PV2 Investment and South Basic

Can any of the company-specific risk be diversified away by investing in both PV2 Investment and South Basic 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 PV2 Investment and South Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PV2 Investment JSC and South Basic Chemicals, you can compare the effects of market volatilities on PV2 Investment and South Basic 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 PV2 Investment with a short position of South Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of PV2 Investment and South Basic.

Diversification Opportunities for PV2 Investment and South Basic

-0.15

Correlation Coefficient

PV2 Investment  South Basic

Good diversification

The 3 months correlation between PV2 and South is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding PV2 Investment JSC and South Basic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Basic Chemicals and PV2 Investment 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 PV2 Investment JSC are associated (or correlated) with South Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Basic Chemicals has no effect on the direction of PV2 Investment i.e., PV2 Investment and South Basic go up and down completely randomly.

Pair Corralation between PV2 Investment and South Basic

Assuming the 90 days trading horizon PV2 Investment JSC is expected to generate 2.54 times more return on investment than South Basic. However, PV2 Investment is 2.54 times more volatile than South Basic Chemicals. It trades about 0.15 of its potential returns per unit of risk. South Basic Chemicals is currently generating about -0.08 per unit of risk. If you would invest  250,000  in PV2 Investment JSC on December 20, 2024 and sell it today you would earn a total of  110,000  from holding PV2 Investment JSC or generate 44.0% return on investment over 90 days.

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

PV2 Investment JSC  vs.  South Basic Chemicals

PV2 Investment JSC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PV2 Investment JSC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, PV2 Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

South Basic Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days South Basic Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with PV2 Investment and South Basic

The main advantage of trading using opposite PV2 Investment and South Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PV2 Investment position performs unexpectedly, South Basic 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 South Basic will offset losses from the drop in South Basic's long position.

The idea behind PV2 Investment JSC and South Basic Chemicals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.