Correlation Between World Oil and Flex
Can any of the company-specific risk be diversified away by investing in both World Oil and Flex 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 World Oil and Flex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Oil Group and Flex, you can compare the effects of market volatilities on World Oil and Flex 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 World Oil with a short position of Flex. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Oil and Flex.
Diversification Opportunities for World Oil and Flex
Good diversification
The 3 months correlation between World and Flex is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding World Oil Group and Flex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex and World Oil 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 World Oil Group are associated (or correlated) with Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex has no effect on the direction of World Oil i.e., World Oil and Flex go up and down completely randomly.
Pair Corralation between World Oil and Flex
Given the investment horizon of 90 days World Oil Group is expected to generate 2.79 times more return on investment than Flex. However, World Oil is 2.79 times more volatile than Flex. It trades about 0.08 of its potential returns per unit of risk. Flex is currently generating about 0.08 per unit of risk. If you would invest 0.50 in World Oil Group on September 3, 2024 and sell it today you would earn a total of 1.32 from holding World Oil Group or generate 264.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Oil Group vs. Flex
Performance |
| Timeline |
| World Oil Group |
| Flex |
World Oil and Flex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Oil and Flex
The main advantage of trading using opposite World Oil and Flex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Oil position performs unexpectedly, Flex 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 Flex will offset losses from the drop in Flex's long position.| World Oil vs. The Gap, | World Oil vs. PVH Corp | World Oil vs. Space Communication | World Oil vs. Iridium Communications |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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