Correlation Between Timken and OZ Minerals
Can any of the company-specific risk be diversified away by investing in both Timken and OZ Minerals 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 Timken and OZ Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and OZ Minerals Limited, you can compare the effects of market volatilities on Timken and OZ Minerals 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 Timken with a short position of OZ Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and OZ Minerals.
Diversification Opportunities for Timken and OZ Minerals
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Timken and OZMLF is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and OZ Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OZ Minerals Limited and Timken 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 Timken Company are associated (or correlated) with OZ Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OZ Minerals Limited has no effect on the direction of Timken i.e., Timken and OZ Minerals go up and down completely randomly.
Pair Corralation between Timken and OZ Minerals
Considering the 90-day investment horizon Timken is expected to generate 4.6 times less return on investment than OZ Minerals. But when comparing it to its historical volatility, Timken Company is 2.14 times less risky than OZ Minerals. It trades about 0.02 of its potential returns per unit of risk. OZ Minerals Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,693 in OZ Minerals Limited on September 13, 2024 and sell it today you would earn a total of 207.00 from holding OZ Minerals Limited or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 20.04% |
| Values | Daily Returns |
Timken Company vs. OZ Minerals Limited
Performance |
| Timeline |
| Timken Company |
| OZ Minerals Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Timken and OZ Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and OZ Minerals
The main advantage of trading using opposite Timken and OZ Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, OZ Minerals 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 OZ Minerals will offset losses from the drop in OZ Minerals' long position.The idea behind Timken Company and OZ Minerals Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| OZ Minerals vs. Timken Company | OZ Minerals vs. Acme United | OZ Minerals vs. Edgewell Personal Care | OZ Minerals vs. Skechers USA |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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