Correlation Between Petrochemical and Terminal X
Can any of the company-specific risk be diversified away by investing in both Petrochemical and Terminal X 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 Terminal X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrochemical and Terminal X Online, you can compare the effects of market volatilities on Petrochemical and Terminal X 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 Terminal X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrochemical and Terminal X.
Diversification Opportunities for Petrochemical and Terminal X
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Petrochemical and Terminal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and Terminal X Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terminal X Online 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 Terminal X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terminal X Online has no effect on the direction of Petrochemical i.e., Petrochemical and Terminal X go up and down completely randomly.
Pair Corralation between Petrochemical and Terminal X
Assuming the 90 days trading horizon Petrochemical is expected to under-perform the Terminal X. In addition to that, Petrochemical is 1.06 times more volatile than Terminal X Online. It trades about -0.04 of its total potential returns per unit of risk. Terminal X Online is currently generating about 0.36 per unit of volatility. If you would invest 38,740 in Terminal X Online on September 1, 2024 and sell it today you would earn a total of 4,580 from holding Terminal X Online or generate 11.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrochemical vs. Terminal X Online
Performance |
| Timeline |
| Petrochemical |
| Terminal X Online |
Petrochemical and Terminal X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrochemical and Terminal X
The main advantage of trading using opposite Petrochemical and Terminal X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrochemical position performs unexpectedly, Terminal X 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 Terminal X will offset losses from the drop in Terminal X's long position.| Petrochemical vs. Brainsway | Petrochemical vs. Mivne Real Estate | Petrochemical vs. Photomyne | Petrochemical vs. Israel Land Development |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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