Correlation Between Oil and Invest Capital

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

Diversification Opportunities for Oil and Invest Capital

0.45

Correlation Coefficient

Oil  Invest Capital

Very weak diversification

The 3 months correlation between Oil and Invest is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Invest Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invest Capital Investment 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 Invest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invest Capital Investment has no effect on the direction of Oil i.e., Oil and Invest Capital go up and down completely randomly.

Pair Corralation between Oil and Invest Capital

Assuming the 90 days trading horizon Oil and Gas is expected to generate 0.64 times more return on investment than Invest Capital. However, Oil and Gas is 1.57 times less risky than Invest Capital. It trades about 0.17 of its potential returns per unit of risk. Invest Capital Investment is currently generating about 0.01 per unit of risk. If you would invest  16,329  in Oil and Gas on October 11, 2024 and sell it today you would earn a total of  4,966  from holding Oil and Gas or generate 30.41% return on investment over 90 days.

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

Oil and Gas  vs.  Invest Capital Investment

Oil and Gas

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oil and Gas are ranked lower than 13 (%) 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.

Invest Capital Investment

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invest Capital Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Invest Capital is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Oil and Invest Capital

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

The idea behind Oil and Gas and Invest Capital Investment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.