Correlation Between Invest Capital and Oil

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

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

Diversification Opportunities for Invest Capital and Oil

0.44

Correlation Coefficient

Invest Capital  Oil

Very weak diversification

The 3 months correlation between Invest and Oil is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and Invest Capital 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 Invest Capital Investment are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Invest Capital i.e., Invest Capital and Oil go up and down completely randomly.

Pair Corralation between Invest Capital and Oil

Assuming the 90 days trading horizon Invest Capital Investment is expected to under-perform the Oil. In addition to that, Invest Capital is 1.52 times more volatile than Oil and Gas. It trades about -0.1 of its total potential returns per unit of risk. Oil and Gas is currently generating about 0.18 per unit of volatility. If you would invest  19,741  in Oil and Gas on October 6, 2024 and sell it today you would earn a total of  2,467  from holding Oil and Gas or generate 12.5% return on investment over 90 days.

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

Invest Capital Investment  vs.  Oil and Gas

Invest Capital Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invest Capital Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Invest Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Oil and Gas

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oil and Gas are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invest Capital and Oil

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

The idea behind Invest Capital Investment and Oil and Gas 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.