Correlation Between Blue Owl and ARCA Oil

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

By analyzing existing cross correlation between Blue Owl Capital and ARCA Oil, you can compare the effects of market volatilities on Blue Owl and ARCA Oil 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 Blue Owl with a short position of ARCA Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Owl and ARCA Oil.

Diversification Opportunities for Blue Owl and ARCA Oil

-0.43

Correlation Coefficient

Blue Owl  ARCA Oil

Very good diversification

The 3 months correlation between Blue and ARCA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Blue Owl Capital and ARCA Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Oil and Blue Owl 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 Blue Owl Capital are associated (or correlated) with ARCA Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Oil has no effect on the direction of Blue Owl i.e., Blue Owl and ARCA Oil go up and down completely randomly.

Pair Corralation between Blue Owl and ARCA Oil

Considering the 90-day investment horizon Blue Owl Capital is expected to generate 1.76 times more return on investment than ARCA Oil. However, Blue Owl is 1.76 times more volatile than ARCA Oil. It trades about 0.06 of its potential returns per unit of risk. ARCA Oil is currently generating about -0.15 per unit of risk. If you would invest  2,350  in Blue Owl Capital on October 6, 2024 and sell it today you would earn a total of  53.00  from holding Blue Owl Capital or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Blue Owl Capital  vs.  ARCA Oil

Pair Trading with Blue Owl and ARCA Oil

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

The idea behind Blue Owl Capital and ARCA Oil 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.