Correlation Between B Yair and Petrochemical

Can any of the company-specific risk be diversified away by investing in both B Yair 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 B Yair and Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between B Yair Building and Petrochemical, you can compare the effects of market volatilities on B Yair 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 B Yair with a short position of Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Yair and Petrochemical.

Diversification Opportunities for B Yair and Petrochemical

-0.18

Correlation Coefficient

B Yair  Petrochemical

Good diversification

The 3 months correlation between BYAR and Petrochemical is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding B Yair Building and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical and B Yair 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 B Yair Building 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 B Yair i.e., B Yair and Petrochemical go up and down completely randomly.

Pair Corralation between B Yair and Petrochemical

Assuming the 90 days trading horizon B Yair Building is expected to generate 2.16 times more return on investment than Petrochemical. However, B Yair is 2.16 times more volatile than Petrochemical. It trades about 0.09 of its potential returns per unit of risk. Petrochemical is currently generating about 0.09 per unit of risk. If you would invest  104,800  in B Yair Building on September 26, 2024 and sell it today you would earn a total of  39,200  from holding B Yair Building or generate 37.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

B Yair Building  vs.  Petrochemical

B Yair Building

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in B Yair Building are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, B Yair sustained solid returns over the last few months and may actually be approaching a breakup point.

Petrochemical

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Petrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Petrochemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with B Yair and Petrochemical

The main advantage of trading using opposite B Yair and Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Yair 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.

The idea behind B Yair Building and Petrochemical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.