Correlation Between First International and Paz Oil
Can any of the company-specific risk be diversified away by investing in both First International and Paz Oil 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 First International and Paz Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First International Bank and Paz Oil, you can compare the effects of market volatilities on First International and Paz Oil 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 First International with a short position of Paz Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of First International and Paz Oil.
Diversification Opportunities for First International and Paz Oil
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Paz is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First International Bank and Paz Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paz Oil and First International 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 First International Bank are associated (or correlated) with Paz Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paz Oil has no effect on the direction of First International i.e., First International and Paz Oil go up and down completely randomly.
Pair Corralation between First International and Paz Oil
Assuming the 90 days trading horizon First International is expected to generate 1.95 times less return on investment than Paz Oil. But when comparing it to its historical volatility, First International Bank is 1.3 times less risky than Paz Oil. It trades about 0.11 of its potential returns per unit of risk. Paz Oil is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,292,627 in Paz Oil on September 2, 2024 and sell it today you would earn a total of 1,047,373 from holding Paz Oil or generate 31.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First International Bank vs. Paz Oil
Performance |
| Timeline |
| First International Bank |
| Paz Oil |
First International and Paz Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First International and Paz Oil
The main advantage of trading using opposite First International and Paz Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First International position performs unexpectedly, Paz Oil 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 Paz Oil will offset losses from the drop in Paz Oil's long position.| First International vs. Israel Discount Bank | First International vs. Mizrahi Tefahot | First International vs. Bank Leumi Le Israel | First International vs. Bank Hapoalim |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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