Correlation Between Oil Gas and Financials Ultrasector
Can any of the company-specific risk be diversified away by investing in both Oil Gas and Financials Ultrasector 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 Oil Gas and Financials Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Gas Ultrasector and Financials Ultrasector Profund, you can compare the effects of market volatilities on Oil Gas and Financials Ultrasector 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 Oil Gas with a short position of Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Financials Ultrasector.
Diversification Opportunities for Oil Gas and Financials Ultrasector
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Oil and Financials is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Oil Gas i.e., Oil Gas and Financials Ultrasector go up and down completely randomly.
Pair Corralation between Oil Gas and Financials Ultrasector
Assuming the 90 days horizon Oil Gas is expected to generate 41.06 times less return on investment than Financials Ultrasector. In addition to that, Oil Gas is 1.17 times more volatile than Financials Ultrasector Profund. It trades about 0.01 of its total potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.29 per unit of volatility. If you would invest 3,365 in Financials Ultrasector Profund on November 4, 2024 and sell it today you would earn a total of 289.00 from holding Financials Ultrasector Profund or generate 8.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Gas Ultrasector vs. Financials Ultrasector Profund
Performance |
| Timeline |
| Oil Gas Ultrasector |
| Financials Ultrasector |
Oil Gas and Financials Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil Gas and Financials Ultrasector
The main advantage of trading using opposite Oil Gas and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector's long position.| Oil Gas vs. Precious Metals Ultrasector | Oil Gas vs. Real Estate Ultrasector | Oil Gas vs. Basic Materials Ultrasector | Oil Gas vs. Utilities Ultrasector Profund |
| Financials Ultrasector vs. Needham Aggressive Growth | Financials Ultrasector vs. Growth Allocation Fund | Financials Ultrasector vs. Small Pany Growth | Financials Ultrasector vs. L Abbett Growth |
Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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