Correlation Between Motor Oil and CPI Computer

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

By analyzing existing cross correlation between Motor Oil Corinth and CPI Computer Peripherals, you can compare the effects of market volatilities on Motor Oil and CPI Computer 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 Motor Oil with a short position of CPI Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motor Oil and CPI Computer.

Diversification Opportunities for Motor Oil and CPI Computer

0.37

Correlation Coefficient

Motor Oil  CPI Computer

Weak diversification

The 3 months correlation between Motor and CPI is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Motor Oil Corinth and CPI Computer Peripherals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Computer Peripherals and Motor Oil 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 Motor Oil Corinth are associated (or correlated) with CPI Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Computer Peripherals has no effect on the direction of Motor Oil i.e., Motor Oil and CPI Computer go up and down completely randomly.

Pair Corralation between Motor Oil and CPI Computer

Assuming the 90 days trading horizon Motor Oil Corinth is expected to generate 0.4 times more return on investment than CPI Computer. However, Motor Oil Corinth is 2.49 times less risky than CPI Computer. It trades about 0.15 of its potential returns per unit of risk. CPI Computer Peripherals is currently generating about 0.06 per unit of risk. If you would invest  2,024  in Motor Oil Corinth on December 28, 2024 and sell it today you would earn a total of  254.00  from holding Motor Oil Corinth or generate 12.55% return on investment over 90 days.

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

Motor Oil Corinth  vs.  CPI Computer Peripherals

Motor Oil Corinth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motor Oil Corinth are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, Motor Oil unveiled solid returns over the last few months and may actually be approaching a breakup point.

CPI Computer Peripherals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Computer Peripherals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, CPI Computer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Motor Oil and CPI Computer

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

The idea behind Motor Oil Corinth and CPI Computer Peripherals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.