Correlation Between Inflection Point and ARCA Oil

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Inflection Point and ARCA 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 Inflection Point and ARCA Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflection Point Acquisition and ARCA Oil, you can compare the effects of market volatilities on Inflection Point and ARCA 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 Inflection Point with a short position of ARCA Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflection Point and ARCA Oil.

Diversification Opportunities for Inflection Point and ARCA Oil

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Inflection and ARCA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Inflection Point Acquisition and ARCA Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Oil and Inflection Point 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 Inflection Point Acquisition are associated (or correlated) with ARCA Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Oil has no effect on the direction of Inflection Point i.e., Inflection Point and ARCA Oil go up and down completely randomly.
    Optimize

Pair Corralation between Inflection Point and ARCA Oil

Assuming the 90 days horizon Inflection Point Acquisition is expected to under-perform the ARCA Oil. In addition to that, Inflection Point is 7.36 times more volatile than ARCA Oil. It trades about -0.01 of its total potential returns per unit of risk. ARCA Oil is currently generating about 0.96 per unit of volatility. If you would invest  171,348  in ARCA Oil on October 23, 2024 and sell it today you would earn a total of  21,674  from holding ARCA Oil or generate 12.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Inflection Point Acquisition  vs.  ARCA Oil

 Performance 
       Timeline  

Inflection Point and ARCA Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Inflection Point and ARCA Oil

The main advantage of trading using opposite Inflection Point and ARCA Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflection Point position performs unexpectedly, ARCA 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 ARCA Oil will offset losses from the drop in ARCA Oil's long position.
The idea behind Inflection Point Acquisition and ARCA Oil 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

Other Complementary Tools

Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Transaction History
View history of all your transactions and understand their impact on performance
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
Funds Screener
Find actively-traded funds from around the world traded on over 30 global exchanges