Correlation Between Oil Equipment and Short Oil
Can any of the company-specific risk be diversified away by investing in both Oil Equipment and Short Oil 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 Short Oil 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 Short Oil Gas, you can compare the effects of market volatilities on Oil Equipment and Short Oil 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 Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Equipment and Short Oil.
Diversification Opportunities for Oil Equipment and Short Oil
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Oil and Short is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Oil Equipment Services and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Oil Equipment i.e., Oil Equipment and Short Oil go up and down completely randomly.
Pair Corralation between Oil Equipment and Short Oil
Assuming the 90 days horizon Oil Equipment Services is expected to generate 2.56 times more return on investment than Short Oil. However, Oil Equipment is 2.56 times more volatile than Short Oil Gas. It trades about 0.01 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.04 per unit of risk. If you would invest 8,983 in Oil Equipment Services on August 27, 2024 and sell it today you would lose (167.00) from holding Oil Equipment Services or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Equipment Services vs. Short Oil Gas
Performance |
| Timeline |
| Oil Equipment Services |
| Short Oil Gas |
Oil Equipment and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil Equipment and Short Oil
The main advantage of trading using opposite Oil Equipment and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Equipment position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil's long position.| Oil Equipment vs. Morgan Stanley Government | Oil Equipment vs. T Rowe Price | Oil Equipment vs. Dreyfus Institutional Reserves | Oil Equipment vs. Franklin Government Money |
| Short Oil vs. Short Real Estate | Short Oil vs. Short Real Estate | Short Oil vs. Ultrashort Mid Cap Profund | Short Oil vs. Ultrashort Mid Cap Profund |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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