Correlation Between Petrochemical and Inrom Construction
Can any of the company-specific risk be diversified away by investing in both Petrochemical and Inrom Construction 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 Inrom Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrochemical and Inrom Construction Industries, you can compare the effects of market volatilities on Petrochemical and Inrom Construction 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 Inrom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrochemical and Inrom Construction.
Diversification Opportunities for Petrochemical and Inrom Construction
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Petrochemical and Inrom is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and Inrom Construction Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inrom Construction 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 Inrom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inrom Construction has no effect on the direction of Petrochemical i.e., Petrochemical and Inrom Construction go up and down completely randomly.
Pair Corralation between Petrochemical and Inrom Construction
Assuming the 90 days trading horizon Petrochemical is expected to generate 5.97 times less return on investment than Inrom Construction. In addition to that, Petrochemical is 1.15 times more volatile than Inrom Construction Industries. It trades about 0.06 of its total potential returns per unit of risk. Inrom Construction Industries is currently generating about 0.4 per unit of volatility. If you would invest 104,587 in Inrom Construction Industries on August 25, 2024 and sell it today you would earn a total of 51,513 from holding Inrom Construction Industries or generate 49.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrochemical vs. Inrom Construction Industries
Performance |
| Timeline |
| Petrochemical |
| Inrom Construction |
Petrochemical and Inrom Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrochemical and Inrom Construction
The main advantage of trading using opposite Petrochemical and Inrom Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrochemical position performs unexpectedly, Inrom Construction 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 Inrom Construction will offset losses from the drop in Inrom Construction's 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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