Correlation Between Paz Oil and Delek

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

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

Diversification Opportunities for Paz Oil and Delek

0.83

Correlation Coefficient

Paz Oil  Delek

Very poor diversification

The 3 months correlation between Paz and Delek is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Paz Oil and Delek Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Group and Paz Oil 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 Paz Oil are associated (or correlated) with Delek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Group has no effect on the direction of Paz Oil i.e., Paz Oil and Delek go up and down completely randomly.

Pair Corralation between Paz Oil and Delek

Assuming the 90 days trading horizon Paz Oil is expected to generate 1.57 times less return on investment than Delek. But when comparing it to its historical volatility, Paz Oil is 1.13 times less risky than Delek. It trades about 0.11 of its potential returns per unit of risk. Delek Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,651,000  in Delek Group on December 21, 2024 and sell it today you would earn a total of  787,000  from holding Delek Group or generate 16.92% return on investment over 90 days.

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

Paz Oil  vs.  Delek Group

Paz Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paz Oil are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Paz Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Delek Group

Risk-Adjusted Performance

Good

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

Pair Trading with Paz Oil and Delek

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

The idea behind Paz Oil and Delek Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.