Correlation Between Paz Oil and Victory Supermarket

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

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

Diversification Opportunities for Paz Oil and Victory Supermarket

0.88

Correlation Coefficient

Paz Oil  Victory Supermarket

Very poor diversification

The 3 months correlation between Paz and Victory is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Paz Oil and Victory Supermarket Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Supermarket Chain and Paz 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 Paz Oil are associated (or correlated) with Victory Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Supermarket Chain has no effect on the direction of Paz Oil i.e., Paz Oil and Victory Supermarket go up and down completely randomly.

Pair Corralation between Paz Oil and Victory Supermarket

Assuming the 90 days trading horizon Paz Oil is expected to under-perform the Victory Supermarket. But the stock apears to be less risky and, when comparing its historical volatility, Paz Oil is 1.34 times less risky than Victory Supermarket. The stock trades about -0.14 of its potential returns per unit of risk. The Victory Supermarket Chain is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  485,000  in Victory Supermarket Chain on February 5, 2024 and sell it today you would earn a total of  5,000  from holding Victory Supermarket Chain or generate 1.03% return on investment over 90 days.

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

Paz Oil  vs.  Victory Supermarket Chain

Paz Oil

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paz Oil are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Paz Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Victory Supermarket Chain

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Supermarket Chain are ranked lower than 20 (%) 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.

Pair Trading with Paz Oil and Victory Supermarket

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

The idea behind Paz Oil and Victory Supermarket Chain 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.