Correlation Between Petrochemical and First International
Can any of the company-specific risk be diversified away by investing in both Petrochemical and First International 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 First International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrochemical and First International Bank, you can compare the effects of market volatilities on Petrochemical and First International 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 First International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrochemical and First International.
Diversification Opportunities for Petrochemical and First International
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Petrochemical and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and First International Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First International Bank 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 First International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First International Bank has no effect on the direction of Petrochemical i.e., Petrochemical and First International go up and down completely randomly.
Pair Corralation between Petrochemical and First International
Assuming the 90 days trading horizon Petrochemical is expected to under-perform the First International. In addition to that, Petrochemical is 1.77 times more volatile than First International Bank. It trades about -0.04 of its total potential returns per unit of risk. First International Bank is currently generating about 0.15 per unit of volatility. If you would invest 1,663,000 in First International Bank on September 1, 2024 and sell it today you would earn a total of 49,000 from holding First International Bank or generate 2.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrochemical vs. First International Bank
Performance |
| Timeline |
| Petrochemical |
| First International Bank |
Petrochemical and First International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrochemical and First International
The main advantage of trading using opposite Petrochemical and First International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrochemical position performs unexpectedly, First International 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 First International will offset losses from the drop in First International's long position.| Petrochemical vs. Brainsway | Petrochemical vs. Mivne Real Estate | Petrochemical vs. Photomyne | Petrochemical vs. Israel Land Development |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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