Correlation Between Oil Gas and Energy Fund

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

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

Diversification Opportunities for Oil Gas and Energy Fund

0.97

Correlation Coefficient

Oil Gas  Energy Fund

Almost no diversification

The 3 months correlation between Oil and Energy is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Energy Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Class and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Class has no effect on the direction of Oil Gas i.e., Oil Gas and Energy Fund go up and down completely randomly.

Pair Corralation between Oil Gas and Energy Fund

Assuming the 90 days horizon Oil Gas Ultrasector is expected to generate 1.38 times more return on investment than Energy Fund. However, Oil Gas is 1.38 times more volatile than Energy Fund Class. It trades about 0.01 of its potential returns per unit of risk. Energy Fund Class is currently generating about 0.0 per unit of risk. If you would invest  3,974  in Oil Gas Ultrasector on October 7, 2024 and sell it today you would earn a total of  90.00  from holding Oil Gas Ultrasector or generate 2.26% return on investment over 90 days.

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

Oil Gas Ultrasector  vs.  Energy Fund Class

Oil Gas Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Gas Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Energy Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Oil Gas and Energy Fund

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

The idea behind Oil Gas Ultrasector and Energy Fund Class 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.