Correlation Between Short Oil and Ab Small

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Can any of the company-specific risk be diversified away by investing in both Short Oil and Ab Small 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 Short Oil and Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Oil Gas and Ab Small Cap, you can compare the effects of market volatilities on Short Oil and Ab Small 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 Short Oil with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Ab Small.

Diversification Opportunities for Short Oil and Ab Small

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Short and QUAIX is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Short 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 Short Oil Gas are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Short Oil i.e., Short Oil and Ab Small go up and down completely randomly.

Pair Corralation between Short Oil and Ab Small

Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Ab Small. In addition to that, Short Oil is 1.11 times more volatile than Ab Small Cap. It trades about -0.26 of its total potential returns per unit of risk. Ab Small Cap is currently generating about -0.26 per unit of volatility. If you would invest  7,786  in Ab Small Cap on October 16, 2024 and sell it today you would lose (507.00) from holding Ab Small Cap or give up 6.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Short Oil Gas  vs.  Ab Small Cap

 Performance 
       Timeline  
Short Oil Gas 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Short Oil Gas has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Short Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Ab Small Cap 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ab Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Short Oil and Ab Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Short Oil and Ab Small

The main advantage of trading using opposite Short Oil and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil position performs unexpectedly, Ab Small 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 Ab Small will offset losses from the drop in Ab Small's long position.
The idea behind Short Oil Gas and Ab Small Cap 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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