Correlation Between Short Oil and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both Short Oil and Inflation Protection 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 Inflation Protection 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 Inflation Protection Fund, you can compare the effects of market volatilities on Short Oil and Inflation Protection 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 Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Inflation Protection.
Diversification Opportunities for Short Oil and Inflation Protection
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Short and Inflation is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection 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 Inflation Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protection has no effect on the direction of Short Oil i.e., Short Oil and Inflation Protection go up and down completely randomly.
Pair Corralation between Short Oil and Inflation Protection
Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Inflation Protection. In addition to that, Short Oil is 3.4 times more volatile than Inflation Protection Fund. It trades about -0.03 of its total potential returns per unit of risk. Inflation Protection Fund is currently generating about 0.02 per unit of volatility. If you would invest 702.00 in Inflation Protection Fund on September 2, 2024 and sell it today you would earn a total of 16.00 from holding Inflation Protection Fund or generate 2.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Short Oil Gas vs. Inflation Protection Fund
Performance |
| Timeline |
| Short Oil Gas |
| Inflation Protection |
Short Oil and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Oil and Inflation Protection
The main advantage of trading using opposite Short Oil and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil position performs unexpectedly, Inflation Protection 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 Inflation Protection will offset losses from the drop in Inflation Protection's long position.| Short Oil vs. Mutual Of America | Short Oil vs. Ultramid Cap Profund Ultramid Cap | Short Oil vs. Columbia Small Cap | Short Oil vs. Victory Rs Partners |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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