Correlation Between Olin and Select Energy
Can any of the company-specific risk be diversified away by investing in both Olin and Select Energy 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 Olin and Select Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olin Corporation and Select Energy Services, you can compare the effects of market volatilities on Olin and Select Energy 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 Olin with a short position of Select Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olin and Select Energy.
Diversification Opportunities for Olin and Select Energy
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Olin and Select is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Olin Corp. and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services and Olin 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 Olin Corporation are associated (or correlated) with Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Olin i.e., Olin and Select Energy go up and down completely randomly.
Pair Corralation between Olin and Select Energy
Considering the 90-day investment horizon Olin is expected to generate 6.67 times less return on investment than Select Energy. But when comparing it to its historical volatility, Olin Corporation is 3.17 times less risky than Select Energy. It trades about 0.13 of its potential returns per unit of risk. Select Energy Services is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,072 in Select Energy Services on August 27, 2024 and sell it today you would earn a total of 397.00 from holding Select Energy Services or generate 37.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olin Corp. vs. Select Energy Services
Performance |
| Timeline |
| Olin |
| Select Energy Services |
Olin and Select Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olin and Select Energy
The main advantage of trading using opposite Olin and Select Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olin position performs unexpectedly, Select Energy 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 Select Energy will offset losses from the drop in Select Energy's long position.The idea behind Olin Corporation and Select Energy Services 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.| Select Energy vs. ProPetro Holding Corp | Select Energy vs. RPC Inc | Select Energy vs. MRC Global | Select Energy vs. Expro Group Holdings |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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