Correlation Between Oil Natural and MAS Financial

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

Diversification Opportunities for Oil Natural and MAS Financial

0.48

Correlation Coefficient

Oil Natural  MAS Financial

Very weak diversification

The 3 months correlation between Oil and MAS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and MAS Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAS Financial Services 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 MAS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAS Financial Services has no effect on the direction of Oil Natural i.e., Oil Natural and MAS Financial go up and down completely randomly.

Pair Corralation between Oil Natural and MAS Financial

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 1.38 times more return on investment than MAS Financial. However, Oil Natural is 1.38 times more volatile than MAS Financial Services. It trades about -0.02 of its potential returns per unit of risk. MAS Financial Services is currently generating about -0.14 per unit of risk. If you would invest  26,130  in Oil Natural Gas on October 6, 2024 and sell it today you would lose (241.00) from holding Oil Natural Gas or give up 0.92% of portfolio value over 90 days.

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

Oil Natural Gas  vs.  MAS Financial Services

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

MAS Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAS Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, MAS Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oil Natural and MAS Financial

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

The idea behind Oil Natural Gas and MAS Financial Services 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.