Correlation Between Ratio Oil and Clal Biotechnology

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

By analyzing existing cross correlation between Ratio Oil Explorations and Clal Biotechnology Industries, you can compare the effects of market volatilities on Ratio Oil and Clal Biotechnology 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 Ratio Oil with a short position of Clal Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ratio Oil and Clal Biotechnology.

Diversification Opportunities for Ratio Oil and Clal Biotechnology

-0.24

Correlation Coefficient

Ratio Oil  Clal Biotechnology

Very good diversification

The 3 months correlation between Ratio and Clal is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ratio Oil Explorations and Clal Biotechnology Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Biotechnology and Ratio Oil 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 Ratio Oil Explorations are associated (or correlated) with Clal Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Biotechnology has no effect on the direction of Ratio Oil i.e., Ratio Oil and Clal Biotechnology go up and down completely randomly.

Pair Corralation between Ratio Oil and Clal Biotechnology

Assuming the 90 days trading horizon Ratio Oil Explorations is expected to generate 1.01 times more return on investment than Clal Biotechnology. However, Ratio Oil is 1.01 times more volatile than Clal Biotechnology Industries. It trades about 0.11 of its potential returns per unit of risk. Clal Biotechnology Industries is currently generating about 0.06 per unit of risk. If you would invest  35,010  in Ratio Oil Explorations on December 23, 2024 and sell it today you would earn a total of  3,570  from holding Ratio Oil Explorations or generate 10.2% return on investment over 90 days.

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

Ratio Oil Explorations  vs.  Clal Biotechnology Industries

Ratio Oil Explorations

Risk-Adjusted Performance

OK

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

Clal Biotechnology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clal Biotechnology Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Clal Biotechnology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ratio Oil and Clal Biotechnology

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

The idea behind Ratio Oil Explorations and Clal Biotechnology Industries 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.