Correlation Between Oil Equipment and Small Cap
Can any of the company-specific risk be diversified away by investing in both Oil Equipment 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 Equipment 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 Equipment Services and Small Cap Profund Small Cap, you can compare the effects of market volatilities on Oil Equipment 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 Equipment with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Equipment and Small Cap.
Diversification Opportunities for Oil Equipment and Small Cap
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oil and Small is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Oil Equipment Services and Small Cap Profund Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Profund and Oil Equipment 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 Equipment Services 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 Profund has no effect on the direction of Oil Equipment i.e., Oil Equipment and Small Cap go up and down completely randomly.
Pair Corralation between Oil Equipment and Small Cap
Assuming the 90 days horizon Oil Equipment Services is expected to generate 1.61 times more return on investment than Small Cap. However, Oil Equipment is 1.61 times more volatile than Small Cap Profund Small Cap. It trades about 0.73 of its potential returns per unit of risk. Small Cap Profund Small Cap is currently generating about 0.12 per unit of risk. If you would invest 6,940 in Oil Equipment Services on October 20, 2024 and sell it today you would earn a total of 1,820 from holding Oil Equipment Services or generate 26.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Equipment Services vs. Small Cap Profund Small Cap
Performance |
| Timeline |
| Oil Equipment Services |
| Small Cap Profund |
Oil Equipment and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil Equipment and Small Cap
The main advantage of trading using opposite Oil Equipment and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Equipment 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 Equipment vs. Blackrock All Cap Energy | Oil Equipment vs. Thrivent Natural Resources | Oil Equipment vs. Ivy Natural Resources | Oil Equipment vs. Fidelity Advisor Energy |
| Small Cap vs. Touchstone Large Cap | Small Cap vs. Fisher Large Cap | Small Cap vs. Vest Large Cap | Small Cap vs. Calvert Large Cap |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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