Correlation Between Oil Gas and Foreign Bond
Can any of the company-specific risk be diversified away by investing in both Oil Gas and Foreign Bond 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 Foreign Bond 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 Foreign Bond Fund, you can compare the effects of market volatilities on Oil Gas and Foreign Bond 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 Foreign Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Foreign Bond.
Diversification Opportunities for Oil Gas and Foreign Bond
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Oil and Foreign is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Foreign Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Bond 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 Foreign Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Bond has no effect on the direction of Oil Gas i.e., Oil Gas and Foreign Bond go up and down completely randomly.
Pair Corralation between Oil Gas and Foreign Bond
Assuming the 90 days horizon Oil Gas Ultrasector is expected to under-perform the Foreign Bond. In addition to that, Oil Gas is 5.8 times more volatile than Foreign Bond Fund. It trades about -0.02 of its total potential returns per unit of risk. Foreign Bond Fund is currently generating about 0.26 per unit of volatility. If you would invest 738.00 in Foreign Bond Fund on November 29, 2024 and sell it today you would earn a total of 14.00 from holding Foreign Bond Fund or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Gas Ultrasector vs. Foreign Bond Fund
Performance |
| Timeline |
| Oil Gas Ultrasector |
| Foreign Bond |
Oil Gas and Foreign Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil Gas and Foreign Bond
The main advantage of trading using opposite Oil Gas and Foreign Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas position performs unexpectedly, Foreign Bond 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 Foreign Bond will offset losses from the drop in Foreign Bond'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 |
| Foreign Bond vs. Massmutual Premier E | Foreign Bond vs. Oklahoma College Savings | Foreign Bond vs. Versatile Bond Portfolio | Foreign Bond vs. The Hartford World |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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