Correlation Between Oil Gas and Steward Large

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

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

Diversification Opportunities for Oil Gas and Steward Large

0.78

Correlation Coefficient

Oil Gas  Steward Large

Poor diversification

The 3 months correlation between Oil and Steward is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Steward Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Large Cap and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Steward Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Large Cap has no effect on the direction of Oil Gas i.e., Oil Gas and Steward Large go up and down completely randomly.

Pair Corralation between Oil Gas and Steward Large

Assuming the 90 days horizon Oil Gas is expected to generate 3.14 times less return on investment than Steward Large. In addition to that, Oil Gas is 2.41 times more volatile than Steward Large Cap. It trades about 0.02 of its total potential returns per unit of risk. Steward Large Cap is currently generating about 0.12 per unit of volatility. If you would invest  2,441  in Steward Large Cap on September 12, 2024 and sell it today you would earn a total of  1,368  from holding Steward Large Cap or generate 56.04% return on investment over 90 days.

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

Oil Gas Ultrasector  vs.  Steward Large Cap

Oil Gas Ultrasector

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Gas Ultrasector are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oil Gas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Steward Large Cap

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Large Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oil Gas and Steward Large

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

The idea behind Oil Gas Ultrasector and Steward Large 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.