Correlation Between HVC Investment and Petrolimex International

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

By analyzing existing cross correlation between HVC Investment and and Petrolimex International Trading, you can compare the effects of market volatilities on HVC Investment and Petrolimex International 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 HVC Investment with a short position of Petrolimex International. Check out your portfolio center. Please also check ongoing floating volatility patterns of HVC Investment and Petrolimex International.

Diversification Opportunities for HVC Investment and Petrolimex International

0.09

Correlation Coefficient

HVC Investment  Petrolimex International

Significant diversification

The 3 months correlation between HVC and Petrolimex is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding HVC Investment and and Petrolimex International Tradi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex International and HVC Investment 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 HVC Investment and are associated (or correlated) with Petrolimex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex International has no effect on the direction of HVC Investment i.e., HVC Investment and Petrolimex International go up and down completely randomly.

Pair Corralation between HVC Investment and Petrolimex International

Assuming the 90 days trading horizon HVC Investment and is expected to generate 0.74 times more return on investment than Petrolimex International. However, HVC Investment and is 1.35 times less risky than Petrolimex International. It trades about 0.04 of its potential returns per unit of risk. Petrolimex International Trading is currently generating about -0.02 per unit of risk. If you would invest  849,000  in HVC Investment and on September 15, 2024 and sell it today you would earn a total of  27,000  from holding HVC Investment and or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

HVC Investment and  vs.  Petrolimex International Tradi

HVC Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HVC Investment and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, HVC Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Petrolimex International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HVC Investment and Petrolimex International

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

The idea behind HVC Investment and and Petrolimex International Trading 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.