Correlation Between Oil States and Applied Industrial
Can any of the company-specific risk be diversified away by investing in both Oil States and Applied Industrial 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 States and Applied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil States International and Applied Industrial Technologies, you can compare the effects of market volatilities on Oil States and Applied Industrial 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 States with a short position of Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil States and Applied Industrial.
Diversification Opportunities for Oil States and Applied Industrial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oil and Applied is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and Oil States 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 States International are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Oil States i.e., Oil States and Applied Industrial go up and down completely randomly.
Pair Corralation between Oil States and Applied Industrial
Considering the 90-day investment horizon Oil States is expected to generate 1.06 times less return on investment than Applied Industrial. In addition to that, Oil States is 1.52 times more volatile than Applied Industrial Technologies. It trades about 0.09 of its total potential returns per unit of risk. Applied Industrial Technologies is currently generating about 0.15 per unit of volatility. If you would invest 18,943 in Applied Industrial Technologies on September 3, 2024 and sell it today you would earn a total of 8,348 from holding Applied Industrial Technologies or generate 44.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil States International vs. Applied Industrial Technologie
Performance |
| Timeline |
| Oil States International |
| Applied Industrial |
Oil States and Applied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil States and Applied Industrial
The main advantage of trading using opposite Oil States and Applied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil States position performs unexpectedly, Applied Industrial 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 Applied Industrial will offset losses from the drop in Applied Industrial's long position.| Oil States vs. Oceaneering International | Oil States vs. ChampionX | Oil States vs. TechnipFMC PLC | Oil States vs. Helix Energy Solutions |
| Applied Industrial vs. Core Main | Applied Industrial vs. BlueLinx Holdings | Applied Industrial vs. EVI Industries | Applied Industrial vs. Watsco Inc |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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