Correlation Between Cross Timbers and WT Offshore

Can any of the company-specific risk be diversified away by investing in both Cross Timbers and WT Offshore 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 Cross Timbers and WT Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cross Timbers Royalty and WT Offshore, you can compare the effects of market volatilities on Cross Timbers and WT Offshore 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 Cross Timbers with a short position of WT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cross Timbers and WT Offshore.

Diversification Opportunities for Cross Timbers and WT Offshore

0.31

Correlation Coefficient

Cross Timbers  WT Offshore

Weak diversification

The 3 months correlation between Cross and WTI is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore and Cross Timbers 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 Cross Timbers Royalty are associated (or correlated) with WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of Cross Timbers i.e., Cross Timbers and WT Offshore go up and down completely randomly.

Pair Corralation between Cross Timbers and WT Offshore

Considering the 90-day investment horizon Cross Timbers Royalty is expected to generate 0.5 times more return on investment than WT Offshore. However, Cross Timbers Royalty is 2.01 times less risky than WT Offshore. It trades about -0.32 of its potential returns per unit of risk. WT Offshore is currently generating about -0.47 per unit of risk. If you would invest  1,069  in Cross Timbers Royalty on September 24, 2024 and sell it today you would lose (108.00) from holding Cross Timbers Royalty or give up 10.1% of portfolio value over 90 days.

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

Cross Timbers Royalty  vs.  WT Offshore

Cross Timbers Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cross Timbers Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

WT Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Cross Timbers and WT Offshore

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

The idea behind Cross Timbers Royalty and WT Offshore 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.