Correlation Between Delek and Paz Oil

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

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

Diversification Opportunities for Delek and Paz Oil

0.92

Correlation Coefficient

Delek  Paz Oil

Almost no diversification

The 3 months correlation between Delek and Paz is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Delek Group and Paz Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paz Oil and Delek 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 Delek Group are associated (or correlated) with Paz Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paz Oil has no effect on the direction of Delek i.e., Delek and Paz Oil go up and down completely randomly.

Pair Corralation between Delek and Paz Oil

Assuming the 90 days trading horizon Delek is expected to generate 1.07 times less return on investment than Paz Oil. In addition to that, Delek is 1.27 times more volatile than Paz Oil. It trades about 0.05 of its total potential returns per unit of risk. Paz Oil is currently generating about 0.06 per unit of volatility. If you would invest  2,824,920  in Paz Oil on September 4, 2024 and sell it today you would earn a total of  1,535,080  from holding Paz Oil or generate 54.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Delek Group  vs.  Paz Oil

Delek Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Delek unveiled solid returns over the last few months and may actually be approaching a breakup point.

Paz Oil

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Delek and Paz Oil

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

The idea behind Delek Group and Paz Oil 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.