Correlation Between Flour Mills and Motor Oil

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

By analyzing existing cross correlation between Flour Mills Kepenos and Motor Oil Corinth, you can compare the effects of market volatilities on Flour Mills and Motor 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 Flour Mills with a short position of Motor Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flour Mills and Motor Oil.

Diversification Opportunities for Flour Mills and Motor Oil

-0.7

Correlation Coefficient

Flour Mills  Motor Oil

Excellent diversification

The 3 months correlation between Flour and Motor is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Flour Mills Kepenos and Motor Oil Corinth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motor Oil Corinth and Flour Mills 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 Flour Mills Kepenos are associated (or correlated) with Motor Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motor Oil Corinth has no effect on the direction of Flour Mills i.e., Flour Mills and Motor Oil go up and down completely randomly.

Pair Corralation between Flour Mills and Motor Oil

Assuming the 90 days trading horizon Flour Mills Kepenos is expected to generate 3.12 times more return on investment than Motor Oil. However, Flour Mills is 3.12 times more volatile than Motor Oil Corinth. It trades about 0.14 of its potential returns per unit of risk. Motor Oil Corinth is currently generating about -0.06 per unit of risk. If you would invest  163.00  in Flour Mills Kepenos on September 14, 2024 and sell it today you would earn a total of  59.00  from holding Flour Mills Kepenos or generate 36.2% return on investment over 90 days.

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

Flour Mills Kepenos  vs.  Motor Oil Corinth

Flour Mills Kepenos

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flour Mills Kepenos are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Flour Mills sustained solid returns over the last few months and may actually be approaching a breakup point.

Motor Oil Corinth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Flour Mills and Motor Oil

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

The idea behind Flour Mills Kepenos and Motor Oil Corinth 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.