Correlation Between Big Tech and Ratio Oil

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

By analyzing existing cross correlation between Big Tech 50 and Ratio Oil Explorations, you can compare the effects of market volatilities on Big Tech and Ratio Oil 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 Big Tech with a short position of Ratio Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tech and Ratio Oil.

Diversification Opportunities for Big Tech and Ratio Oil

0.02

Correlation Coefficient

Big Tech  Ratio Oil

Significant diversification

The 3 months correlation between Big and Ratio is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Big Tech 50 and Ratio Oil Explorations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratio Oil Explorations and Big Tech 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 Big Tech 50 are associated (or correlated) with Ratio Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratio Oil Explorations has no effect on the direction of Big Tech i.e., Big Tech and Ratio Oil go up and down completely randomly.

Pair Corralation between Big Tech and Ratio Oil

Assuming the 90 days trading horizon Big Tech 50 is expected to generate 3.4 times more return on investment than Ratio Oil. However, Big Tech is 3.4 times more volatile than Ratio Oil Explorations. It trades about 0.13 of its potential returns per unit of risk. Ratio Oil Explorations is currently generating about 0.16 per unit of risk. If you would invest  11,970  in Big Tech 50 on December 29, 2024 and sell it today you would earn a total of  4,890  from holding Big Tech 50 or generate 40.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.08%
Values	Daily Returns

Big Tech 50  vs.  Ratio Oil Explorations

Big Tech 50

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Big Tech 50 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Big Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Ratio Oil Explorations

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ratio Oil Explorations are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ratio Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Tech and Ratio Oil

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

The idea behind Big Tech 50 and Ratio Oil Explorations 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 Commodity Directory module to find actively traded commodities issued by global exchanges.