Correlation Between Oil and Bestway Cement

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

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

Diversification Opportunities for Oil and Bestway Cement

0.81

Correlation Coefficient

Oil  Bestway Cement

Very poor diversification

The 3 months correlation between Oil and Bestway is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Bestway Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bestway Cement and 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 Oil and Gas are associated (or correlated) with Bestway Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bestway Cement has no effect on the direction of Oil i.e., Oil and Bestway Cement go up and down completely randomly.

Pair Corralation between Oil and Bestway Cement

Assuming the 90 days trading horizon Oil is expected to generate 1.02 times less return on investment than Bestway Cement. In addition to that, Oil is 1.43 times more volatile than Bestway Cement. It trades about 0.11 of its total potential returns per unit of risk. Bestway Cement is currently generating about 0.16 per unit of volatility. If you would invest  9,815  in Bestway Cement on October 7, 2024 and sell it today you would earn a total of  26,498  from holding Bestway Cement or generate 269.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.59%
Values	Daily Returns

Oil and Gas  vs.  Bestway Cement

Oil and Gas

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oil and Gas are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Bestway Cement

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bestway Cement are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Bestway Cement sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil and Bestway Cement

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

The idea behind Oil and Gas and Bestway Cement 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.