Correlation Between World Energy and Cavanal Hill

Can any of the company-specific risk be diversified away by investing in both World Energy and Cavanal Hill 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 World Energy and Cavanal Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between World Energy Fund and Cavanal Hill Ultra, you can compare the effects of market volatilities on World Energy and Cavanal Hill 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 World Energy with a short position of Cavanal Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Cavanal Hill.

Diversification Opportunities for World Energy and Cavanal Hill

0.89

Correlation Coefficient

World Energy  Cavanal Hill

Very poor diversification

The 3 months correlation between World and Cavanal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Cavanal Hill Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavanal Hill Ultra and World Energy 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 World Energy Fund are associated (or correlated) with Cavanal Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavanal Hill Ultra has no effect on the direction of World Energy i.e., World Energy and Cavanal Hill go up and down completely randomly.

Pair Corralation between World Energy and Cavanal Hill

Assuming the 90 days horizon World Energy Fund is expected to generate 22.43 times more return on investment than Cavanal Hill. However, World Energy is 22.43 times more volatile than Cavanal Hill Ultra. It trades about 0.16 of its potential returns per unit of risk. Cavanal Hill Ultra is currently generating about 0.15 per unit of risk. If you would invest  1,314  in World Energy Fund on September 16, 2024 and sell it today you would earn a total of  163.00  from holding World Energy Fund or generate 12.4% return on investment over 90 days.

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

World Energy Fund  vs.  Cavanal Hill Ultra

World Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cavanal Hill Ultra

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cavanal Hill Ultra are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cavanal Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Energy and Cavanal Hill

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

The idea behind World Energy Fund and Cavanal Hill Ultra 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.