Correlation Between Eco Oil and Roper Technologies

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

By analyzing existing cross correlation between Eco Oil Gas and Roper Technologies, you can compare the effects of market volatilities on Eco Oil and Roper Technologies 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 Eco Oil with a short position of Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eco Oil and Roper Technologies.

Diversification Opportunities for Eco Oil and Roper Technologies

-0.38

Correlation Coefficient

Eco Oil  Roper Technologies

Very good diversification

The 3 months correlation between Eco and Roper is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Eco Oil Gas and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies and Eco 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 Eco Oil Gas are associated (or correlated) with Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of Eco Oil i.e., Eco Oil and Roper Technologies go up and down completely randomly.

Pair Corralation between Eco Oil and Roper Technologies

Assuming the 90 days trading horizon Eco Oil Gas is expected to generate 3.02 times more return on investment than Roper Technologies. However, Eco Oil is 3.02 times more volatile than Roper Technologies. It trades about 0.01 of its potential returns per unit of risk. Roper Technologies is currently generating about -0.05 per unit of risk. If you would invest  1,113  in Eco Oil Gas on September 26, 2024 and sell it today you would lose (13.00) from holding Eco Oil Gas or give up 1.17% of portfolio value over 90 days.

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

Eco Oil Gas  vs.  Roper Technologies

Eco Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Eco Oil is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Roper Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roper Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Roper Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eco Oil and Roper Technologies

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

The idea behind Eco Oil Gas and Roper Technologies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.