Correlation Between Petrochemical and Teuza A

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

By analyzing existing cross correlation between Petrochemical and Teuza A Fairchild, you can compare the effects of market volatilities on Petrochemical and Teuza A 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 Teuza A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrochemical and Teuza A.

Diversification Opportunities for Petrochemical and Teuza A

0.25

Correlation Coefficient

Petrochemical  Teuza A

Modest diversification

The 3 months correlation between Petrochemical and Teuza is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Petrochemical and Teuza A Fairchild in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teuza A Fairchild 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 Teuza A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teuza A Fairchild has no effect on the direction of Petrochemical i.e., Petrochemical and Teuza A go up and down completely randomly.

Pair Corralation between Petrochemical and Teuza A

Assuming the 90 days trading horizon Petrochemical is expected to under-perform the Teuza A. But the stock apears to be less risky and, when comparing its historical volatility, Petrochemical is 1.75 times less risky than Teuza A. The stock trades about -0.27 of its potential returns per unit of risk. The Teuza A Fairchild is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,920  in Teuza A Fairchild on September 29, 2024 and sell it today you would lose (90.00) from holding Teuza A Fairchild or give up 2.3% of portfolio value over 90 days.

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

Petrochemical  vs.  Teuza A Fairchild

Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Teuza A Fairchild

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Petrochemical and Teuza A

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

The idea behind Petrochemical and Teuza A Fairchild 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.