Correlation Between Short Oil and World Energy
Can any of the company-specific risk be diversified away by investing in both Short Oil and World 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 Short Oil and World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Oil Gas and World Energy Fund, you can compare the effects of market volatilities on Short Oil and World 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 Short Oil with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and World Energy.
Diversification Opportunities for Short Oil and World Energy
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Short and World is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Short 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 Short Oil Gas are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Short Oil i.e., Short Oil and World Energy go up and down completely randomly.
Pair Corralation between Short Oil and World Energy
Assuming the 90 days horizon Short Oil Gas is expected to under-perform the World Energy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Oil Gas is 1.57 times less risky than World Energy. The mutual fund trades about -0.01 of its potential returns per unit of risk. The World Energy Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,509 in World Energy Fund on November 9, 2024 and sell it today you would earn a total of 28.00 from holding World Energy Fund or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Oil Gas vs. World Energy Fund
Performance |
| Timeline |
| Short Oil Gas |
| World Energy |
Short Oil and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Oil and World Energy
The main advantage of trading using opposite Short Oil and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil position performs unexpectedly, World 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 World Energy will offset losses from the drop in World Energy's long position.| Short Oil vs. Short Precious Metals | Short Oil vs. Short Precious Metals | Short Oil vs. Short Oil Gas | Short Oil vs. Putnam High Yield |
| World Energy vs. Short Oil Gas | World Energy vs. Goehring Rozencwajg Resources | World Energy vs. Clearbridge Energy Mlp | World Energy vs. Pimco Energy Tactical |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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