Correlation Between Pacific Petroleum and Construction

Can any of the company-specific risk be diversified away by investing in both Pacific Petroleum and 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 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 Construction And Investment, you can compare the effects of market volatilities on Pacific Petroleum and 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 Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Petroleum and Construction.

Diversification Opportunities for Pacific Petroleum and Construction

0.57

Correlation Coefficient

Pacific Petroleum  Construction

Very weak diversification

The 3 months correlation between Pacific and Construction is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Petroleum Transportati and Construction And Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction And Inv 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 Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction And Inv has no effect on the direction of Pacific Petroleum i.e., Pacific Petroleum and Construction go up and down completely randomly.

Pair Corralation between Pacific Petroleum and Construction

Assuming the 90 days trading horizon Pacific Petroleum Transportation is expected to generate 1.34 times more return on investment than Construction. However, Pacific Petroleum is 1.34 times more volatile than Construction And Investment. It trades about 0.34 of its potential returns per unit of risk. Construction And Investment is currently generating about -0.01 per unit of risk. If you would invest  1,635,000  in Pacific Petroleum Transportation on October 8, 2024 and sell it today you would earn a total of  175,000  from holding Pacific Petroleum Transportation or generate 10.7% return on investment over 90 days.

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

Pacific Petroleum Transportati  vs.  Construction And Investment

Pacific Petroleum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Petroleum Transportation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pacific Petroleum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Construction And Inv

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Construction And Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Petroleum and Construction

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

The idea behind Pacific Petroleum Transportation and Construction And Investment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.