Correlation Between Oil and Security Investment
Can any of the company-specific risk be diversified away by investing in both Oil and Security Investment 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 Security Investment 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 Security Investment Bank, you can compare the effects of market volatilities on Oil and Security Investment 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 Security Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and Security Investment.
Diversification Opportunities for Oil and Security Investment
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Oil and Security is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Security Investment Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Investment Bank 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 Security Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Investment Bank has no effect on the direction of Oil i.e., Oil and Security Investment go up and down completely randomly.
Pair Corralation between Oil and Security Investment
Assuming the 90 days trading horizon Oil and Gas is expected to generate 0.5 times more return on investment than Security Investment. However, Oil and Gas is 1.98 times less risky than Security Investment. It trades about 0.28 of its potential returns per unit of risk. Security Investment Bank is currently generating about 0.06 per unit of risk. If you would invest 17,162 in Oil and Gas on August 28, 2024 and sell it today you would earn a total of 2,120 from holding Oil and Gas or generate 12.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Oil and Gas vs. Security Investment Bank
Performance |
| Timeline |
| Oil and Gas |
| Security Investment Bank |
Oil and Security Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and Security Investment
The main advantage of trading using opposite Oil and Security Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil position performs unexpectedly, Security Investment 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 Security Investment will offset losses from the drop in Security Investment's long position.The idea behind Oil and Gas and Security Investment Bank 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.| Security Investment vs. Oil and Gas | Security Investment vs. Beco Steel | Security Investment vs. Wah Nobel Chemicals | Security Investment vs. Hi Tech Lubricants |
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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