Correlation Between Petrochemical and Amot Investments

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

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

Diversification Opportunities for Petrochemical and Amot Investments

0.53

Correlation Coefficient

Petrochemical  Amot Investments

Very weak diversification

The 3 months correlation between Petrochemical and Amot is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and Amot Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amot Investments and Petrochemical 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 Petrochemical are associated (or correlated) with Amot Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amot Investments has no effect on the direction of Petrochemical i.e., Petrochemical and Amot Investments go up and down completely randomly.

Pair Corralation between Petrochemical and Amot Investments

Assuming the 90 days trading horizon Petrochemical is expected to generate 6.75 times less return on investment than Amot Investments. In addition to that, Petrochemical is 1.66 times more volatile than Amot Investments. It trades about 0.05 of its total potential returns per unit of risk. Amot Investments is currently generating about 0.53 per unit of volatility. If you would invest  144,174  in Amot Investments on September 17, 2024 and sell it today you would earn a total of  61,726  from holding Amot Investments or generate 42.81% return on investment over 90 days.

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

Petrochemical  vs.  Amot Investments

Petrochemical

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petrochemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Petrochemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amot Investments

Risk-Adjusted Performance

41 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Amot Investments are ranked lower than 41 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amot Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petrochemical and Amot Investments

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

The idea behind Petrochemical and Amot Investments 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.