Correlation Between Oil Natural and Exxaro Tiles

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

Diversification Opportunities for Oil Natural and Exxaro Tiles

-0.07

Correlation Coefficient

Oil Natural  Exxaro Tiles

Good diversification

The 3 months correlation between Oil and Exxaro is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Exxaro Tiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro Tiles Limited 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 Exxaro Tiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Tiles Limited has no effect on the direction of Oil Natural i.e., Oil Natural and Exxaro Tiles go up and down completely randomly.

Pair Corralation between Oil Natural and Exxaro Tiles

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 0.56 times more return on investment than Exxaro Tiles. However, Oil Natural Gas is 1.79 times less risky than Exxaro Tiles. It trades about 0.05 of its potential returns per unit of risk. Exxaro Tiles Limited is currently generating about -0.24 per unit of risk. If you would invest  25,890  in Oil Natural Gas on October 10, 2024 and sell it today you would earn a total of  459.00  from holding Oil Natural Gas or generate 1.77% return on investment over 90 days.

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

Oil Natural Gas  vs.  Exxaro Tiles Limited

Oil Natural Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Natural Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Exxaro Tiles Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxaro Tiles Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Exxaro Tiles sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil Natural and Exxaro Tiles

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

The idea behind Oil Natural Gas and Exxaro Tiles Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.