Correlation Between Materials Petroleum and Development Investment

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

By analyzing existing cross correlation between Materials Petroleum JSC and Development Investment Construction, you can compare the effects of market volatilities on Materials Petroleum and Development Investment 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 Materials Petroleum with a short position of Development Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Petroleum and Development Investment.

Diversification Opportunities for Materials Petroleum and Development Investment

0.42

Correlation Coefficient

Materials Petroleum  Development Investment

Very weak diversification

The 3 months correlation between Materials and Development is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Materials Petroleum JSC and Development Investment Constru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Investment and Materials Petroleum 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 Materials Petroleum JSC are associated (or correlated) with Development Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Investment has no effect on the direction of Materials Petroleum i.e., Materials Petroleum and Development Investment go up and down completely randomly.

Pair Corralation between Materials Petroleum and Development Investment

Assuming the 90 days trading horizon Materials Petroleum JSC is expected to generate 1.92 times more return on investment than Development Investment. However, Materials Petroleum is 1.92 times more volatile than Development Investment Construction. It trades about 0.06 of its potential returns per unit of risk. Development Investment Construction is currently generating about 0.12 per unit of risk. If you would invest  3,100,000  in Materials Petroleum JSC on May 2, 2025 and sell it today you would earn a total of  200,000  from holding Materials Petroleum JSC or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.24%
Values	Daily Returns

Materials Petroleum JSC  vs.  Development Investment Constru

Materials Petroleum JSC

Risk-Adjusted Performance

Modest

Over the last 90 days Materials Petroleum JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating primary indicators, Materials Petroleum displayed solid returns over the last few months and may actually be approaching a breakup point.

Development Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Development Investment Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Development Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materials Petroleum and Development Investment

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

The idea behind Materials Petroleum JSC and Development Investment Construction 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.