Correlation Between Prime Oil and Sporton International

Can any of the company-specific risk be diversified away by investing in both Prime Oil and Sporton International 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 Prime Oil and Sporton International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prime Oil Chemical and Sporton International, you can compare the effects of market volatilities on Prime Oil and Sporton International 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 Prime Oil with a short position of Sporton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Oil and Sporton International.

Diversification Opportunities for Prime Oil and Sporton International

0.32

Correlation Coefficient

Prime Oil  Sporton International

Weak diversification

The 3 months correlation between Prime and Sporton is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Prime Oil Chemical and Sporton International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporton International and Prime 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 Prime Oil Chemical are associated (or correlated) with Sporton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporton International has no effect on the direction of Prime Oil i.e., Prime Oil and Sporton International go up and down completely randomly.

Pair Corralation between Prime Oil and Sporton International

Assuming the 90 days trading horizon Prime Oil Chemical is expected to generate 0.52 times more return on investment than Sporton International. However, Prime Oil Chemical is 1.92 times less risky than Sporton International. It trades about 0.16 of its potential returns per unit of risk. Sporton International is currently generating about -0.02 per unit of risk. If you would invest  1,785  in Prime Oil Chemical on December 22, 2024 and sell it today you would earn a total of  100.00  from holding Prime Oil Chemical or generate 5.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Prime Oil Chemical  vs.  Sporton International

Prime Oil Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Oil Chemical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Prime Oil is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sporton International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sporton International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sporton International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Prime Oil and Sporton International

The main advantage of trading using opposite Prime Oil and Sporton International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Oil position performs unexpectedly, Sporton International 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 Sporton International will offset losses from the drop in Sporton International's long position.

The idea behind Prime Oil Chemical and Sporton International 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.

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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.