Correlation Between Motor Oil and Quest Holdings

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

Diversification Opportunities for Motor Oil and Quest Holdings

0.57

Correlation Coefficient

Motor Oil  Quest Holdings

Very weak diversification

The 3 months correlation between Motor and Quest is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Motor Oil Corinth and Quest Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quest Holdings SA 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 Quest Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quest Holdings SA has no effect on the direction of Motor Oil i.e., Motor Oil and Quest Holdings go up and down completely randomly.

Pair Corralation between Motor Oil and Quest Holdings

Assuming the 90 days trading horizon Motor Oil Corinth is expected to generate 0.99 times more return on investment than Quest Holdings. However, Motor Oil Corinth is 1.01 times less risky than Quest Holdings. It trades about 0.16 of its potential returns per unit of risk. Quest Holdings SA is currently generating about 0.03 per unit of risk. If you would invest  2,024  in Motor Oil Corinth on December 30, 2024 and sell it today you would earn a total of  264.00  from holding Motor Oil Corinth or generate 13.04% return on investment over 90 days.

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

Motor Oil Corinth  vs.  Quest Holdings SA

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.

Quest Holdings SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Holdings SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Quest Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Motor Oil and Quest Holdings

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

The idea behind Motor Oil Corinth and Quest Holdings SA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.