Correlation Between Oil Gas and Small Cap
Can any of the company-specific risk be diversified away by investing in both Oil Gas and Small Cap 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 Small Cap 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 Small Cap Equity, you can compare the effects of market volatilities on Oil Gas and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Small Cap.
Diversification Opportunities for Oil Gas and Small Cap
Poor diversification
The 3 months correlation between Oil and Small is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Oil Gas i.e., Oil Gas and Small Cap go up and down completely randomly.
Pair Corralation between Oil Gas and Small Cap
Assuming the 90 days horizon Oil Gas is expected to generate 4.48 times less return on investment than Small Cap. In addition to that, Oil Gas is 1.91 times more volatile than Small Cap Equity. It trades about 0.02 of its total potential returns per unit of risk. Small Cap Equity is currently generating about 0.21 per unit of volatility. If you would invest 1,807 in Small Cap Equity on November 5, 2024 and sell it today you would earn a total of 67.00 from holding Small Cap Equity or generate 3.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Oil Gas Ultrasector vs. Small Cap Equity
Performance |
Timeline |
Oil Gas Ultrasector |
Small Cap Equity |
Oil Gas and Small Cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Oil Gas and Small Cap
The main advantage of trading using opposite Oil Gas and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.Oil Gas vs. Oil Gas Ultrasector | Oil Gas vs. Ultramid Cap Profund Ultramid Cap | Oil Gas vs. Precious Metals Ultrasector | Oil Gas vs. Real Estate Ultrasector |
Small Cap vs. Mid Cap 15x Strategy | Small Cap vs. Transamerica Emerging Markets | Small Cap vs. Western Assets Emerging | Small Cap vs. Growth Strategy Fund |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Commodity Directory Find actively traded commodities issued by global exchanges |