Correlation Between Snap and Heating Oil
Can any of the company-specific risk be diversified away by investing in both Snap and Heating Oil 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 Snap and Heating Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Heating Oil, you can compare the effects of market volatilities on Snap and Heating Oil 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 Snap with a short position of Heating Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Heating Oil.
Diversification Opportunities for Snap and Heating Oil
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Snap and Heating is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Heating Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heating Oil and Snap 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 Snap Inc are associated (or correlated) with Heating Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heating Oil has no effect on the direction of Snap i.e., Snap and Heating Oil go up and down completely randomly.
Pair Corralation between Snap and Heating Oil
Given the investment horizon of 90 days Snap Inc is expected to under-perform the Heating Oil. In addition to that, Snap is 2.14 times more volatile than Heating Oil. It trades about -0.03 of its total potential returns per unit of risk. Heating Oil is currently generating about -0.05 per unit of volatility. If you would invest 223.00 in Heating Oil on September 1, 2024 and sell it today you would lose (4.00) from holding Heating Oil or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Snap Inc vs. Heating Oil
Performance |
| Timeline |
| Snap Inc |
| Heating Oil |
Snap and Heating Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Heating Oil
The main advantage of trading using opposite Snap and Heating Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Heating Oil 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 Heating Oil will offset losses from the drop in Heating Oil's long position.The idea behind Snap Inc and Heating Oil 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.| Heating Oil vs. Live Cattle Futures | Heating Oil vs. Palladium | Heating Oil vs. 30 Year Treasury | Heating Oil vs. Silver Futures |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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