Correlation Between Scope Metals and Ratio Oil

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

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

Diversification Opportunities for Scope Metals and Ratio Oil

0.41

Correlation Coefficient

Scope Metals  Ratio Oil

Very weak diversification

The 3 months correlation between Scope and Ratio is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Scope Metals Group and Ratio Oil Explorations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratio Oil Explorations and Scope Metals 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 Scope Metals Group are associated (or correlated) with Ratio Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratio Oil Explorations has no effect on the direction of Scope Metals i.e., Scope Metals and Ratio Oil go up and down completely randomly.

Pair Corralation between Scope Metals and Ratio Oil

Assuming the 90 days trading horizon Scope Metals Group is expected to under-perform the Ratio Oil. But the stock apears to be less risky and, when comparing its historical volatility, Scope Metals Group is 1.04 times less risky than Ratio Oil. The stock trades about -0.06 of its potential returns per unit of risk. The Ratio Oil Explorations is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  32,501  in Ratio Oil Explorations on December 29, 2024 and sell it today you would earn a total of  5,299  from holding Ratio Oil Explorations or generate 16.3% return on investment over 90 days.

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

Scope Metals Group  vs.  Ratio Oil Explorations

Scope Metals Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scope Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ratio Oil Explorations

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ratio Oil Explorations are ranked lower than 12 (%) 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.

Pair Trading with Scope Metals and Ratio Oil

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

The idea behind Scope Metals Group and Ratio Oil Explorations 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.