Correlation Between Oil Dri and Hawkins

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

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

Diversification Opportunities for Oil Dri and Hawkins

-0.25

Correlation Coefficient

Oil Dri  Hawkins

Very good diversification

The 3 months correlation between Oil and Hawkins is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Oil Dri and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins and Oil Dri 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 Oil Dri are associated (or correlated) with Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Oil Dri i.e., Oil Dri and Hawkins go up and down completely randomly.

Pair Corralation between Oil Dri and Hawkins

Considering the 90-day investment horizon Oil Dri is expected to generate 0.88 times more return on investment than Hawkins. However, Oil Dri is 1.14 times less risky than Hawkins. It trades about 0.06 of its potential returns per unit of risk. Hawkins is currently generating about -0.09 per unit of risk. If you would invest  4,355  in Oil Dri on December 28, 2024 and sell it today you would earn a total of  290.00  from holding Oil Dri or generate 6.66% return on investment over 90 days.

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

Oil Dri  vs.  Hawkins

Oil Dri

Risk-Adjusted Performance

Insignificant

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

Hawkins

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hawkins has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Oil Dri and Hawkins

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

The idea behind Oil Dri and Hawkins 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.