Correlation Between Petrochemical and GODM Investments
Can any of the company-specific risk be diversified away by investing in both Petrochemical and GODM Investments 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 GODM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrochemical and GODM Investments, you can compare the effects of market volatilities on Petrochemical and GODM Investments 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 GODM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrochemical and GODM Investments.
Diversification Opportunities for Petrochemical and GODM Investments
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Petrochemical and GODM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and GODM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GODM Investments 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 GODM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GODM Investments has no effect on the direction of Petrochemical i.e., Petrochemical and GODM Investments go up and down completely randomly.
Pair Corralation between Petrochemical and GODM Investments
Assuming the 90 days trading horizon Petrochemical is expected to generate 0.85 times more return on investment than GODM Investments. However, Petrochemical is 1.18 times less risky than GODM Investments. It trades about 0.0 of its potential returns per unit of risk. GODM Investments is currently generating about -0.09 per unit of risk. If you would invest 21,070 in Petrochemical on September 1, 2024 and sell it today you would lose (990.00) from holding Petrochemical or give up 4.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrochemical vs. GODM Investments
Performance |
| Timeline |
| Petrochemical |
| GODM Investments |
Petrochemical and GODM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrochemical and GODM Investments
The main advantage of trading using opposite Petrochemical and GODM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrochemical position performs unexpectedly, GODM Investments 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 GODM Investments will offset losses from the drop in GODM Investments' 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 Stocks Directory module to find actively traded stocks across global markets.
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