Correlation Between Oil Natural and EIH Associated

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

Diversification Opportunities for Oil Natural and EIH Associated

0.7

Correlation Coefficient

Oil Natural  EIH Associated

Poor diversification

The 3 months correlation between Oil and EIH is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels 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 EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of Oil Natural i.e., Oil Natural and EIH Associated go up and down completely randomly.

Pair Corralation between Oil Natural and EIH Associated

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 0.64 times more return on investment than EIH Associated. However, Oil Natural Gas is 1.56 times less risky than EIH Associated. It trades about 0.05 of its potential returns per unit of risk. EIH Associated Hotels is currently generating about -0.07 per unit of risk. If you would invest  23,458  in Oil Natural Gas on December 31, 2024 and sell it today you would earn a total of  1,180  from holding Oil Natural Gas or generate 5.03% 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.  EIH Associated Hotels

Oil Natural Gas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

EIH Associated Hotels

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Oil Natural and EIH Associated

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

The idea behind Oil Natural Gas and EIH Associated Hotels 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.