Correlation Between Oil Natural and City Union

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

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

Diversification Opportunities for Oil Natural and City Union

0.66

Correlation Coefficient

Oil Natural  City Union

Poor diversification

The 3 months correlation between Oil and City is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank and Oil Natural 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 Natural Gas are associated (or correlated) with City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of Oil Natural i.e., Oil Natural and City Union go up and down completely randomly.

Pair Corralation between Oil Natural and City Union

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 1.06 times more return on investment than City Union. However, Oil Natural is 1.06 times more volatile than City Union Bank. It trades about 0.07 of its potential returns per unit of risk. City Union Bank is currently generating about -0.07 per unit of risk. If you would invest  22,811  in Oil Natural Gas on December 29, 2024 and sell it today you would earn a total of  1,827  from holding Oil Natural Gas or generate 8.01% return on investment over 90 days.

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

Oil Natural Gas  vs.  City Union Bank

Oil Natural Gas

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Oil Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

City Union Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Union Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Oil Natural and City Union

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

The idea behind Oil Natural Gas and City Union Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.