Correlation Between MicroSectorsTM Oil and PEMEX

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

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

Diversification Opportunities for MicroSectorsTM Oil and PEMEX

-0.43

Correlation Coefficient

MicroSectorsTM Oil  PEMEX

Very good diversification

The 3 months correlation between MicroSectorsTM and PEMEX is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectorsTM Oil Gas and PEMEX PROJ FDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEMEX PROJ FDG and MicroSectorsTM Oil 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 MicroSectorsTM Oil Gas are associated (or correlated) with PEMEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEMEX PROJ FDG has no effect on the direction of MicroSectorsTM Oil i.e., MicroSectorsTM Oil and PEMEX go up and down completely randomly.

Pair Corralation between MicroSectorsTM Oil and PEMEX

Given the investment horizon of 90 days MicroSectorsTM Oil Gas is expected to generate 1.97 times more return on investment than PEMEX. However, MicroSectorsTM Oil is 1.97 times more volatile than PEMEX PROJ FDG. It trades about 0.07 of its potential returns per unit of risk. PEMEX PROJ FDG is currently generating about 0.01 per unit of risk. If you would invest  3,309  in MicroSectorsTM Oil Gas on August 31, 2024 and sell it today you would earn a total of  386.50  from holding MicroSectorsTM Oil Gas or generate 11.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

MicroSectorsTM Oil Gas  vs.  PEMEX PROJ FDG

MicroSectorsTM Oil Gas

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectorsTM Oil Gas are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, MicroSectorsTM Oil unveiled solid returns over the last few months and may actually be approaching a breakup point.

PEMEX PROJ FDG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MicroSectorsTM Oil and PEMEX

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

The idea behind MicroSectorsTM Oil Gas and PEMEX PROJ FDG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.