Correlation Between Packages and Oil
Can any of the company-specific risk be diversified away by investing in both Packages and 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 Packages and Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and Oil and Gas, you can compare the effects of market volatilities on Packages and 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 Packages with a short position of Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and Oil.
Diversification Opportunities for Packages and Oil
Significant diversification
The 3 months correlation between Packages and Oil is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and Packages 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 Packages are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Packages i.e., Packages and Oil go up and down completely randomly.
Pair Corralation between Packages and Oil
Assuming the 90 days trading horizon Packages is expected to under-perform the Oil. But the stock apears to be less risky and, when comparing its historical volatility, Packages is 1.12 times less risky than Oil. The stock trades about -0.04 of its potential returns per unit of risk. The Oil and Gas is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 19,187 in Oil and Gas on December 3, 2024 and sell it today you would earn a total of 1,989 from holding Oil and Gas or generate 10.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Packages vs. Oil and Gas
Performance |
Timeline |
Packages |
Oil and Gas |
Packages and Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Packages and Oil
The main advantage of trading using opposite Packages and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages position performs unexpectedly, 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 Oil will offset losses from the drop in Oil's long position.Packages vs. Aisha Steel Mills | Packages vs. International Steels | Packages vs. Bank of Punjab | Packages vs. First Fidelity Leasing |
Oil vs. Pakistan Aluminium Beverage | Oil vs. Nimir Industrial Chemical | Oil vs. Agritech | Oil vs. Air Link Communication |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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