Correlation Between SMC Investment and Petrolimex Petrochemical

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

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

Diversification Opportunities for SMC Investment and Petrolimex Petrochemical

0.09

Correlation Coefficient

SMC Investment  Petrolimex Petrochemical

Significant diversification

The 3 months correlation between SMC and Petrolimex is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SMC Investment Trading and Petrolimex Petrochemical JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Petrochemical and SMC 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 SMC Investment Trading are associated (or correlated) with Petrolimex Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Petrochemical has no effect on the direction of SMC Investment i.e., SMC Investment and Petrolimex Petrochemical go up and down completely randomly.

Pair Corralation between SMC Investment and Petrolimex Petrochemical

Assuming the 90 days trading horizon SMC Investment Trading is expected to generate 1.55 times more return on investment than Petrolimex Petrochemical. However, SMC Investment is 1.55 times more volatile than Petrolimex Petrochemical JSC. It trades about 0.07 of its potential returns per unit of risk. Petrolimex Petrochemical JSC is currently generating about -0.04 per unit of risk. If you would invest  743,000  in SMC Investment Trading on October 4, 2024 and sell it today you would earn a total of  93,000  from holding SMC Investment Trading or generate 12.52% return on investment over 90 days.

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

SMC Investment Trading  vs.  Petrolimex Petrochemical JSC

SMC Investment Trading

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Petrolimex Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SMC Investment and Petrolimex Petrochemical

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

The idea behind SMC Investment Trading and Petrolimex Petrochemical 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.