Correlation Between World Oil and Protect Pharmaceutical

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

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

Diversification Opportunities for World Oil and Protect Pharmaceutical

0.23

Correlation Coefficient

World Oil  Protect Pharmaceutical

Modest diversification

The 3 months correlation between World and Protect is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding World Oil Group and Protect Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protect Pharmaceutical and World 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 World Oil Group are associated (or correlated) with Protect Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protect Pharmaceutical has no effect on the direction of World Oil i.e., World Oil and Protect Pharmaceutical go up and down completely randomly.

Pair Corralation between World Oil and Protect Pharmaceutical

Given the investment horizon of 90 days World Oil Group is expected to generate 0.74 times more return on investment than Protect Pharmaceutical. However, World Oil Group is 1.35 times less risky than Protect Pharmaceutical. It trades about 0.05 of its potential returns per unit of risk. Protect Pharmaceutical is currently generating about -0.09 per unit of risk. If you would invest  2.07  in World Oil Group on September 13, 2024 and sell it today you would earn a total of  0.05  from holding World Oil Group or generate 2.42% return on investment over 90 days.

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

World Oil Group  vs.  Protect Pharmaceutical

World Oil Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in World Oil Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, World Oil demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Protect Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Protect Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with World Oil and Protect Pharmaceutical

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

The idea behind World Oil Group and Protect Pharmaceutical 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.