Correlation Between Transport and Petrolimex Insurance

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

By analyzing existing cross correlation between Transport and Industry and Petrolimex Insurance Corp, you can compare the effects of market volatilities on Transport and Petrolimex Insurance 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 Transport with a short position of Petrolimex Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and Petrolimex Insurance.

Diversification Opportunities for Transport and Petrolimex Insurance

0.5

Correlation Coefficient

Transport  Petrolimex Insurance

Very weak diversification

The 3 months correlation between Transport and Petrolimex is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and Petrolimex Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Insurance Corp and Transport 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 Transport and Industry are associated (or correlated) with Petrolimex Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Insurance Corp has no effect on the direction of Transport i.e., Transport and Petrolimex Insurance go up and down completely randomly.

Pair Corralation between Transport and Petrolimex Insurance

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the Petrolimex Insurance. In addition to that, Transport is 1.02 times more volatile than Petrolimex Insurance Corp. It trades about -0.2 of its total potential returns per unit of risk. Petrolimex Insurance Corp is currently generating about 0.0 per unit of volatility. If you would invest  2,375,000  in Petrolimex Insurance Corp on September 16, 2024 and sell it today you would lose (25,000) from holding Petrolimex Insurance Corp or give up 1.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.82%
Values	Daily Returns

Transport and Industry  vs.  Petrolimex Insurance Corp

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry 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 fundamental 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.

Petrolimex Insurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transport and Petrolimex Insurance

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

The idea behind Transport and Industry and Petrolimex Insurance Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.