Correlation Between Yandex NV and NK Lukoil

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

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

Diversification Opportunities for Yandex NV and NK Lukoil

0.73

Correlation Coefficient

Yandex NV  NK Lukoil

Poor diversification

The 3 months correlation between Yandex and LKOH is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Yandex NV and NK Lukoil PAO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NK Lukoil PAO and Yandex NV 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 Yandex NV are associated (or correlated) with NK Lukoil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NK Lukoil PAO has no effect on the direction of Yandex NV i.e., Yandex NV and NK Lukoil go up and down completely randomly.

Pair Corralation between Yandex NV and NK Lukoil

Assuming the 90 days trading horizon Yandex NV is expected to generate 1.63 times more return on investment than NK Lukoil. However, Yandex NV is 1.63 times more volatile than NK Lukoil PAO. It trades about 0.25 of its potential returns per unit of risk. NK Lukoil PAO is currently generating about 0.17 per unit of risk. If you would invest  338,600  in Yandex NV on February 23, 2024 and sell it today you would earn a total of  86,400  from holding Yandex NV or generate 25.52% return on investment over 90 days.

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

Yandex NV  vs.  NK Lukoil PAO

Yandex NV

Risk-Adjusted Performance

19 of 100

Solid

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

NK Lukoil PAO

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NK Lukoil PAO are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NK Lukoil may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Yandex NV and NK Lukoil

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

The idea behind Yandex NV and NK Lukoil PAO 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.