Correlation Between Oil and AKD Hospitality
Can any of the company-specific risk be diversified away by investing in both Oil and AKD Hospitality 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 and AKD Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil and Gas and AKD Hospitality, you can compare the effects of market volatilities on Oil and AKD Hospitality 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 with a short position of AKD Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and AKD Hospitality.
Diversification Opportunities for Oil and AKD Hospitality
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oil and AKD is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and AKD Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKD Hospitality and 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 Oil and Gas are associated (or correlated) with AKD Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKD Hospitality has no effect on the direction of Oil i.e., Oil and AKD Hospitality go up and down completely randomly.
Pair Corralation between Oil and AKD Hospitality
Assuming the 90 days trading horizon Oil and Gas is expected to under-perform the AKD Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Oil and Gas is 1.68 times less risky than AKD Hospitality. The stock trades about -0.05 of its potential returns per unit of risk. The AKD Hospitality is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 14,901 in AKD Hospitality on October 26, 2024 and sell it today you would earn a total of 655.00 from holding AKD Hospitality or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil and Gas vs. AKD Hospitality
Performance |
| Timeline |
| Oil and Gas |
| AKD Hospitality |
Oil and AKD Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and AKD Hospitality
The main advantage of trading using opposite Oil and AKD Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil position performs unexpectedly, AKD Hospitality 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 AKD Hospitality will offset losses from the drop in AKD Hospitality's long position.The idea behind Oil and Gas and AKD Hospitality pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| AKD Hospitality vs. ITTEFAQ Iron Industries | AKD Hospitality vs. TPL Insurance | AKD Hospitality vs. Crescent Star Insurance | AKD Hospitality vs. Ghandhara Automobile |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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