Correlation Between Materials Petroleum and PVI Reinsurance

Can any of the company-specific risk be diversified away by investing in both Materials Petroleum and PVI Reinsurance 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 PVI Reinsurance 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 PVI Reinsurance Corp, you can compare the effects of market volatilities on Materials Petroleum and PVI Reinsurance 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 PVI Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Petroleum and PVI Reinsurance.

Diversification Opportunities for Materials Petroleum and PVI Reinsurance

0.05

Correlation Coefficient

Materials Petroleum  PVI Reinsurance

Significant diversification

The 3 months correlation between Materials and PVI is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Materials Petroleum JSC and PVI Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVI Reinsurance Corp 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 PVI Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVI Reinsurance Corp has no effect on the direction of Materials Petroleum i.e., Materials Petroleum and PVI Reinsurance go up and down completely randomly.

Pair Corralation between Materials Petroleum and PVI Reinsurance

Assuming the 90 days trading horizon Materials Petroleum is expected to generate 24.08 times less return on investment than PVI Reinsurance. In addition to that, Materials Petroleum is 2.06 times more volatile than PVI Reinsurance Corp. It trades about 0.0 of its total potential returns per unit of risk. PVI Reinsurance Corp is currently generating about 0.08 per unit of volatility. If you would invest  1,840,000  in PVI Reinsurance Corp on September 24, 2024 and sell it today you would earn a total of  140,000  from holding PVI Reinsurance Corp or generate 7.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.59%
Values	Daily Returns

Materials Petroleum JSC  vs.  PVI Reinsurance Corp

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Petroleum JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Materials Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PVI Reinsurance Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PVI Reinsurance Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, PVI Reinsurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Materials Petroleum and PVI Reinsurance

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

The idea behind Materials Petroleum JSC and PVI Reinsurance Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.