Correlation Between Victory Supermarket and Petrochemical

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

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

Diversification Opportunities for Victory Supermarket and Petrochemical

-0.05

Correlation Coefficient

Victory Supermarket  Petrochemical

Good diversification

The 3 months correlation between Victory and Petrochemical is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Victory Supermarket Chain and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical and Victory Supermarket 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 Victory Supermarket Chain are associated (or correlated) with Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrochemical has no effect on the direction of Victory Supermarket i.e., Victory Supermarket and Petrochemical go up and down completely randomly.

Pair Corralation between Victory Supermarket and Petrochemical

Assuming the 90 days trading horizon Victory Supermarket Chain is expected to generate 0.59 times more return on investment than Petrochemical. However, Victory Supermarket Chain is 1.71 times less risky than Petrochemical. It trades about 0.14 of its potential returns per unit of risk. Petrochemical is currently generating about -0.04 per unit of risk. If you would invest  508,000  in Victory Supermarket Chain on September 30, 2024 and sell it today you would earn a total of  51,700  from holding Victory Supermarket Chain or generate 10.18% return on investment over 90 days.

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

Victory Supermarket Chain  vs.  Petrochemical

Victory Supermarket Chain

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Supermarket Chain are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Victory Supermarket sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Victory Supermarket and Petrochemical

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

The idea behind Victory Supermarket Chain and Petrochemical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.