Correlation Between Short Oil and Energy Basic
Can any of the company-specific risk be diversified away by investing in both Short Oil and Energy Basic 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 Energy Basic 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 Energy Basic Materials, you can compare the effects of market volatilities on Short Oil and Energy Basic 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 Energy Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Energy Basic.
Diversification Opportunities for Short Oil and Energy Basic
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Short and Energy is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and Energy Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Basic Materials 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 Energy Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Basic Materials has no effect on the direction of Short Oil i.e., Short Oil and Energy Basic go up and down completely randomly.
Pair Corralation between Short Oil and Energy Basic
Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Energy Basic. In addition to that, Short Oil is 1.22 times more volatile than Energy Basic Materials. It trades about -0.02 of its total potential returns per unit of risk. Energy Basic Materials is currently generating about -0.03 per unit of volatility. If you would invest 1,323 in Energy Basic Materials on August 24, 2024 and sell it today you would lose (54.00) from holding Energy Basic Materials or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Oil Gas vs. Energy Basic Materials
Performance |
| Timeline |
| Short Oil Gas |
| Energy Basic Materials |
Short Oil and Energy Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Oil and Energy Basic
The main advantage of trading using opposite Short Oil and Energy Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil position performs unexpectedly, Energy Basic 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 Energy Basic will offset losses from the drop in Energy Basic's long position.| Short Oil vs. Scharf Global Opportunity | Short Oil vs. Qs Large Cap | Short Oil vs. Acm Dynamic Opportunity | Short Oil vs. Ab Value Fund |
| Energy Basic vs. Vanguard Materials Index | Energy Basic vs. T Rowe Price | Energy Basic vs. Gmo Trust | Energy Basic vs. Gmo Resources |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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