Correlation Between Petrochemical and Dan Hotels
Can any of the company-specific risk be diversified away by investing in both Petrochemical and Dan Hotels 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 Petrochemical and Dan Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrochemical and Dan Hotels, you can compare the effects of market volatilities on Petrochemical and Dan Hotels 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 Petrochemical with a short position of Dan Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrochemical and Dan Hotels.
Diversification Opportunities for Petrochemical and Dan Hotels
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Petrochemical and Dan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and Dan Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dan Hotels and Petrochemical 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 Petrochemical are associated (or correlated) with Dan Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dan Hotels has no effect on the direction of Petrochemical i.e., Petrochemical and Dan Hotels go up and down completely randomly.
Pair Corralation between Petrochemical and Dan Hotels
Assuming the 90 days trading horizon Petrochemical is expected to generate 1.39 times more return on investment than Dan Hotels. However, Petrochemical is 1.39 times more volatile than Dan Hotels. It trades about 0.02 of its potential returns per unit of risk. Dan Hotels is currently generating about 0.0 per unit of risk. If you would invest 18,000 in Petrochemical on August 26, 2024 and sell it today you would earn a total of 1,540 from holding Petrochemical or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrochemical vs. Dan Hotels
Performance |
| Timeline |
| Petrochemical |
| Dan Hotels |
Petrochemical and Dan Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrochemical and Dan Hotels
The main advantage of trading using opposite Petrochemical and Dan Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrochemical position performs unexpectedly, Dan Hotels 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 Dan Hotels will offset losses from the drop in Dan Hotels' long position.| Petrochemical vs. Brainsway | Petrochemical vs. Mivne Real Estate | Petrochemical vs. Israel Land Development | Petrochemical vs. Bezeq Israeli Telecommunication |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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