Correlation Between Terminal X and Petrochemical
Can any of the company-specific risk be diversified away by investing in both Terminal X and Petrochemical 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 Terminal X and Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Terminal X Online and Petrochemical, you can compare the effects of market volatilities on Terminal X and Petrochemical 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 Terminal X with a short position of Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terminal X and Petrochemical.
Diversification Opportunities for Terminal X and Petrochemical
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Terminal and Petrochemical is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Terminal X Online and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical and Terminal X 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 Terminal X Online are associated (or correlated) with Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrochemical has no effect on the direction of Terminal X i.e., Terminal X and Petrochemical go up and down completely randomly.
Pair Corralation between Terminal X and Petrochemical
Assuming the 90 days trading horizon Terminal X Online is expected to generate 0.87 times more return on investment than Petrochemical. However, Terminal X Online is 1.14 times less risky than Petrochemical. It trades about 0.48 of its potential returns per unit of risk. Petrochemical is currently generating about 0.02 per unit of risk. If you would invest 37,900 in Terminal X Online on August 29, 2024 and sell it today you would earn a total of 6,040 from holding Terminal X Online or generate 15.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Terminal X Online vs. Petrochemical
Performance |
| Timeline |
| Terminal X Online |
| Petrochemical |
Terminal X and Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Terminal X and Petrochemical
The main advantage of trading using opposite Terminal X and Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terminal X position performs unexpectedly, Petrochemical 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 Petrochemical will offset losses from the drop in Petrochemical's long position.| Terminal X vs. Fox Wizel | Terminal X vs. Retailors | Terminal X vs. Delek Group | Terminal X vs. Holmes Place International |
| Petrochemical vs. Brainsway | Petrochemical vs. Mivne Real Estate | Petrochemical vs. Israel Land Development | Petrochemical vs. Bezeq Israeli Telecommunication |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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