Correlation Between PCI PAL and CVR Energy

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

By analyzing existing cross correlation between PCI PAL PLC and CVR Energy, you can compare the effects of market volatilities on PCI PAL and CVR Energy 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 PCI PAL with a short position of CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PCI PAL and CVR Energy.

Diversification Opportunities for PCI PAL and CVR Energy

0.44

Correlation Coefficient

PCI PAL  CVR Energy

Very weak diversification

The 3 months correlation between PCI and CVR is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PCI PAL PLC and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and PCI PAL 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 PCI PAL PLC are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of PCI PAL i.e., PCI PAL and CVR Energy go up and down completely randomly.

Pair Corralation between PCI PAL and CVR Energy

Assuming the 90 days trading horizon PCI PAL PLC is expected to under-perform the CVR Energy. But the stock apears to be less risky and, when comparing its historical volatility, PCI PAL PLC is 1.51 times less risky than CVR Energy. The stock trades about 0.0 of its potential returns per unit of risk. The CVR Energy is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,883  in CVR Energy on April 21, 2025 and sell it today you would earn a total of  1,010  from holding CVR Energy or generate 53.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

PCI PAL PLC  vs.  CVR Energy

PCI PAL PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days PCI PAL PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PCI PAL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CVR Energy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CVR Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PCI PAL and CVR Energy

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

The idea behind PCI PAL PLC and CVR Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.