Correlation Between Short Oil and Oil Equipment
Can any of the company-specific risk be diversified away by investing in both Short Oil and Oil Equipment 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 Oil Equipment 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 Oil Equipment Services, you can compare the effects of market volatilities on Short Oil and Oil Equipment 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 Oil Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Oil Equipment.
Diversification Opportunities for Short Oil and Oil Equipment
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Short and Oil is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and Oil Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Equipment Services 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 Oil Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Equipment Services has no effect on the direction of Short Oil i.e., Short Oil and Oil Equipment go up and down completely randomly.
Pair Corralation between Short Oil and Oil Equipment
Assuming the 90 days horizon Short Oil Gas is expected to generate 0.39 times more return on investment than Oil Equipment. However, Short Oil Gas is 2.54 times less risky than Oil Equipment. It trades about 0.01 of its potential returns per unit of risk. Oil Equipment Services is currently generating about -0.04 per unit of risk. If you would invest 1,362 in Short Oil Gas on November 28, 2024 and sell it today you would earn a total of 25.00 from holding Short Oil Gas or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Oil Gas vs. Oil Equipment Services
Performance |
| Timeline |
| Short Oil Gas |
| Oil Equipment Services |
Short Oil and Oil Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Oil and Oil Equipment
The main advantage of trading using opposite Short Oil and Oil Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil position performs unexpectedly, Oil Equipment 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 Oil Equipment will offset losses from the drop in Oil Equipment's long position.| Short Oil vs. Jennison Natural Resources | Short Oil vs. Icon Natural Resources | Short Oil vs. Vanguard Energy Index | Short Oil vs. Tortoise Energy Independence |
| Oil Equipment vs. T Rowe Price | Oil Equipment vs. T Rowe Price | Oil Equipment vs. T Rowe Price | Oil Equipment vs. Boston Partners Small |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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