Correlation Between Rompetrol Rafi and Iproeb SA

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

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

Diversification Opportunities for Rompetrol Rafi and Iproeb SA

0.67

Correlation Coefficient

Rompetrol Rafi  Iproeb SA

Poor diversification

The 3 months correlation between Rompetrol and Iproeb is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rompetrol Rafi and Iproeb SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iproeb SA and Rompetrol Rafi 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 Rompetrol Rafi are associated (or correlated) with Iproeb SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iproeb SA has no effect on the direction of Rompetrol Rafi i.e., Rompetrol Rafi and Iproeb SA go up and down completely randomly.

Pair Corralation between Rompetrol Rafi and Iproeb SA

Assuming the 90 days trading horizon Rompetrol Rafi is expected to under-perform the Iproeb SA. In addition to that, Rompetrol Rafi is 1.14 times more volatile than Iproeb SA. It trades about -0.05 of its total potential returns per unit of risk. Iproeb SA is currently generating about -0.05 per unit of volatility. If you would invest  159.00  in Iproeb SA on September 26, 2024 and sell it today you would lose (26.00) from holding Iproeb SA or give up 16.35% of portfolio value over 90 days.

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

Rompetrol Rafi  vs.  Iproeb SA

Rompetrol Rafi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rompetrol Rafi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Rompetrol Rafi is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Iproeb SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iproeb SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Rompetrol Rafi and Iproeb SA

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

The idea behind Rompetrol Rafi and Iproeb SA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.