Correlation Between Simply Better and Pulse Oil

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

By analyzing existing cross correlation between Simply Better Brands and Pulse Oil Corp, you can compare the effects of market volatilities on Simply Better and Pulse 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 Simply Better with a short position of Pulse Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simply Better and Pulse Oil.

Diversification Opportunities for Simply Better and Pulse Oil

-0.53

Correlation Coefficient

Simply Better  Pulse Oil

Excellent diversification

The 3 months correlation between Simply and Pulse is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Simply Better Brands and Pulse Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulse Oil Corp and Simply Better 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 Simply Better Brands are associated (or correlated) with Pulse Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulse Oil Corp has no effect on the direction of Simply Better i.e., Simply Better and Pulse Oil go up and down completely randomly.

Pair Corralation between Simply Better and Pulse Oil

Assuming the 90 days trading horizon Simply Better Brands is expected to generate 0.35 times more return on investment than Pulse Oil. However, Simply Better Brands is 2.87 times less risky than Pulse Oil. It trades about 0.17 of its potential returns per unit of risk. Pulse Oil Corp is currently generating about 0.01 per unit of risk. If you would invest  64.00  in Simply Better Brands on September 5, 2024 and sell it today you would earn a total of  39.00  from holding Simply Better Brands or generate 60.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Simply Better Brands  vs.  Pulse Oil Corp

Simply Better Brands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Better Brands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Simply Better showed solid returns over the last few months and may actually be approaching a breakup point.

Pulse Oil Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pulse Oil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Pulse Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simply Better and Pulse Oil

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

The idea behind Simply Better Brands and Pulse Oil Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.