Correlation Between Transport and Pacific Petroleum

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

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

Diversification Opportunities for Transport and Pacific Petroleum

-0.35

Correlation Coefficient

Transport  Pacific Petroleum

Very good diversification

The 3 months correlation between Transport and Pacific is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and Pacific Petroleum Transportati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Petroleum and Transport 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 Transport and Industry are associated (or correlated) with Pacific Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Petroleum has no effect on the direction of Transport i.e., Transport and Pacific Petroleum go up and down completely randomly.

Pair Corralation between Transport and Pacific Petroleum

Assuming the 90 days trading horizon Transport is expected to generate 21.68 times less return on investment than Pacific Petroleum. In addition to that, Transport is 1.26 times more volatile than Pacific Petroleum Transportation. It trades about 0.01 of its total potential returns per unit of risk. Pacific Petroleum Transportation is currently generating about 0.37 per unit of volatility. If you would invest  1,625,000  in Pacific Petroleum Transportation on September 29, 2024 and sell it today you would earn a total of  145,000  from holding Pacific Petroleum Transportation or generate 8.92% return on investment over 90 days.

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

Transport and Industry  vs.  Pacific Petroleum Transportati

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pacific Petroleum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Petroleum Transportation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pacific Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transport and Pacific Petroleum

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

The idea behind Transport and Industry and Pacific Petroleum Transportation 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.