Correlation Between Stone Ridge and Short Oil
Can any of the company-specific risk be diversified away by investing in both Stone Ridge and Short 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 Stone Ridge and Short Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and Short Oil Gas, you can compare the effects of market volatilities on Stone Ridge and Short 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 Stone Ridge with a short position of Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Short Oil.
Diversification Opportunities for Stone Ridge and Short Oil
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stone and Short is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas and Stone Ridge 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 Stone Ridge Diversified are associated (or correlated) with Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Stone Ridge i.e., Stone Ridge and Short Oil go up and down completely randomly.
Pair Corralation between Stone Ridge and Short Oil
Assuming the 90 days horizon Stone Ridge Diversified is expected to generate 0.18 times more return on investment than Short Oil. However, Stone Ridge Diversified is 5.47 times less risky than Short Oil. It trades about 0.24 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.05 per unit of risk. If you would invest 1,033 in Stone Ridge Diversified on October 20, 2024 and sell it today you would earn a total of 31.00 from holding Stone Ridge Diversified or generate 3.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Stone Ridge Diversified vs. Short Oil Gas
Performance |
Timeline |
Stone Ridge Diversified |
Short Oil Gas |
Stone Ridge and Short Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Stone Ridge and Short Oil
The main advantage of trading using opposite Stone Ridge and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge position performs unexpectedly, Short 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 Short Oil will offset losses from the drop in Short Oil's long position.Stone Ridge vs. Victory Rs Partners | ||
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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