Correlation Between Short Oil and Capital World
Can any of the company-specific risk be diversified away by investing in both Short Oil and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Short Oil and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Capital World.
Diversification Opportunities for Short Oil and Capital World
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Short and Capital is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Short Oil i.e., Short Oil and Capital World go up and down completely randomly.
Pair Corralation between Short Oil and Capital World
Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Capital World. In addition to that, Short Oil is 2.63 times more volatile than Capital World Bond. It trades about -0.31 of its total potential returns per unit of risk. Capital World Bond is currently generating about 0.06 per unit of volatility. If you would invest 1,610 in Capital World Bond on September 2, 2024 and sell it today you would earn a total of 8.00 from holding Capital World Bond or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Oil Gas vs. Capital World Bond
Performance |
| Timeline |
| Short Oil Gas |
| Capital World Bond |
Short Oil and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Oil and Capital World
The main advantage of trading using opposite Short Oil and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World'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 |
| Capital World vs. Tortoise Energy Independence | Capital World vs. Franklin Natural Resources | Capital World vs. Short Oil Gas | Capital World vs. Fidelity Advisor Energy |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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