Correlation Between Oil Gas and Goehring Rozencwajg

Can any of the company-specific risk be diversified away by investing in both Oil Gas and Goehring Rozencwajg 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 Goehring Rozencwajg 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 Goehring Rozencwajg Resources, you can compare the effects of market volatilities on Oil Gas and Goehring Rozencwajg 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 Goehring Rozencwajg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Goehring Rozencwajg.

Diversification Opportunities for Oil Gas and Goehring Rozencwajg

0.71

Correlation Coefficient

Oil Gas  Goehring Rozencwajg

Poor diversification

The 3 months correlation between Oil and Goehring is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Goehring Rozencwajg Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goehring Rozencwajg 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 Goehring Rozencwajg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goehring Rozencwajg has no effect on the direction of Oil Gas i.e., Oil Gas and Goehring Rozencwajg go up and down completely randomly.

Pair Corralation between Oil Gas and Goehring Rozencwajg

Assuming the 90 days horizon Oil Gas is expected to generate 1.41 times less return on investment than Goehring Rozencwajg. In addition to that, Oil Gas is 1.4 times more volatile than Goehring Rozencwajg Resources. It trades about 0.1 of its total potential returns per unit of risk. Goehring Rozencwajg Resources is currently generating about 0.19 per unit of volatility. If you would invest  1,213  in Goehring Rozencwajg Resources on September 2, 2024 and sell it today you would earn a total of  196.00  from holding Goehring Rozencwajg Resources or generate 16.16% return on investment over 90 days.

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

Oil Gas Ultrasector  vs.  Goehring Rozencwajg Resources

Oil Gas Ultrasector

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Gas Ultrasector are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oil Gas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goehring Rozencwajg

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goehring Rozencwajg Resources are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goehring Rozencwajg showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil Gas and Goehring Rozencwajg

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

The idea behind Oil Gas Ultrasector and Goehring Rozencwajg Resources 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.