Correlation Between Pacific Petroleum and Cotec Construction

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

By analyzing existing cross correlation between Pacific Petroleum Transportation and Cotec Construction JSC, you can compare the effects of market volatilities on Pacific Petroleum and Cotec Construction 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 Pacific Petroleum with a short position of Cotec Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Petroleum and Cotec Construction.

Diversification Opportunities for Pacific Petroleum and Cotec Construction

0.23

Correlation Coefficient

Pacific Petroleum  Cotec Construction

Modest diversification

The 3 months correlation between Pacific and Cotec is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Petroleum Transportati and Cotec Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotec Construction JSC and Pacific Petroleum 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 Pacific Petroleum Transportation are associated (or correlated) with Cotec Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotec Construction JSC has no effect on the direction of Pacific Petroleum i.e., Pacific Petroleum and Cotec Construction go up and down completely randomly.

Pair Corralation between Pacific Petroleum and Cotec Construction

Assuming the 90 days trading horizon Pacific Petroleum is expected to generate 2.71 times less return on investment than Cotec Construction. In addition to that, Pacific Petroleum is 1.08 times more volatile than Cotec Construction JSC. It trades about 0.04 of its total potential returns per unit of risk. Cotec Construction JSC is currently generating about 0.11 per unit of volatility. If you would invest  6,659,852  in Cotec Construction JSC on October 25, 2024 and sell it today you would earn a total of  630,148  from holding Cotec Construction JSC or generate 9.46% return on investment over 90 days.

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

Pacific Petroleum Transportati  vs.  Cotec Construction JSC

Pacific Petroleum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Petroleum Transportation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Pacific Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cotec Construction JSC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cotec Construction JSC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cotec Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pacific Petroleum and Cotec Construction

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

The idea behind Pacific Petroleum Transportation and Cotec Construction 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.