Correlation Between ONEOK and Cool
Can any of the company-specific risk be diversified away by investing in both ONEOK and Cool 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 ONEOK and Cool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ONEOK Inc and Cool Company, you can compare the effects of market volatilities on ONEOK and Cool 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 ONEOK with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of ONEOK and Cool.
Diversification Opportunities for ONEOK and Cool
Excellent diversification
The 3 months correlation between ONEOK and Cool is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and ONEOK 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 ONEOK Inc are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of ONEOK i.e., ONEOK and Cool go up and down completely randomly.
Pair Corralation between ONEOK and Cool
Considering the 90-day investment horizon ONEOK Inc is expected to generate 0.58 times more return on investment than Cool. However, ONEOK Inc is 1.73 times less risky than Cool. It trades about 0.39 of its potential returns per unit of risk. Cool Company is currently generating about -0.28 per unit of risk. If you would invest 9,504 in ONEOK Inc on August 28, 2024 and sell it today you would earn a total of 1,648 from holding ONEOK Inc or generate 17.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ONEOK Inc vs. Cool Company
Performance |
| Timeline |
| ONEOK Inc |
| Cool Company |
ONEOK and Cool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ONEOK and Cool
The main advantage of trading using opposite ONEOK and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.| ONEOK vs. Enterprise Products Partners | ONEOK vs. MPLX LP | ONEOK vs. Energy Transfer LP | ONEOK vs. Plains All American |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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