Correlation Between Materials Petroleum and IDJ FINANCIAL

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

By analyzing existing cross correlation between Materials Petroleum JSC and IDJ FINANCIAL, you can compare the effects of market volatilities on Materials Petroleum and IDJ FINANCIAL 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 Materials Petroleum with a short position of IDJ FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Petroleum and IDJ FINANCIAL.

Diversification Opportunities for Materials Petroleum and IDJ FINANCIAL

-0.16

Correlation Coefficient

Materials Petroleum  IDJ FINANCIAL

Good diversification

The 3 months correlation between Materials and IDJ is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Materials Petroleum JSC and IDJ FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDJ FINANCIAL and Materials Petroleum 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 Materials Petroleum JSC are associated (or correlated) with IDJ FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDJ FINANCIAL has no effect on the direction of Materials Petroleum i.e., Materials Petroleum and IDJ FINANCIAL go up and down completely randomly.

Pair Corralation between Materials Petroleum and IDJ FINANCIAL

Assuming the 90 days trading horizon Materials Petroleum JSC is expected to generate 2.1 times more return on investment than IDJ FINANCIAL. However, Materials Petroleum is 2.1 times more volatile than IDJ FINANCIAL. It trades about 0.03 of its potential returns per unit of risk. IDJ FINANCIAL is currently generating about -0.08 per unit of risk. If you would invest  2,880,000  in Materials Petroleum JSC on September 29, 2024 and sell it today you would earn a total of  50,000  from holding Materials Petroleum JSC or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.38%
Values	Daily Returns

Materials Petroleum JSC  vs.  IDJ FINANCIAL

Materials Petroleum JSC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Petroleum JSC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Materials Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IDJ FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDJ FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Materials Petroleum and IDJ FINANCIAL

The main advantage of trading using opposite Materials Petroleum and IDJ FINANCIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Petroleum position performs unexpectedly, IDJ FINANCIAL 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 IDJ FINANCIAL will offset losses from the drop in IDJ FINANCIAL's long position.

The idea behind Materials Petroleum JSC and IDJ FINANCIAL 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.