Correlation Between Oil Natural and AAA Technologies

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

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

Diversification Opportunities for Oil Natural and AAA Technologies

0.88

Correlation Coefficient

Oil Natural  AAA Technologies

Very poor diversification

The 3 months correlation between Oil and AAA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and AAA Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAA Technologies and Oil Natural 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 Natural Gas are associated (or correlated) with AAA Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAA Technologies has no effect on the direction of Oil Natural i.e., Oil Natural and AAA Technologies go up and down completely randomly.

Pair Corralation between Oil Natural and AAA Technologies

Assuming the 90 days trading horizon Oil Natural is expected to generate 1.35 times less return on investment than AAA Technologies. But when comparing it to its historical volatility, Oil Natural Gas is 1.75 times less risky than AAA Technologies. It trades about 0.08 of its potential returns per unit of risk. AAA Technologies Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,287  in AAA Technologies Limited on September 12, 2024 and sell it today you would earn a total of  6,284  from holding AAA Technologies Limited or generate 118.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Oil Natural Gas  vs.  AAA Technologies Limited

Oil Natural Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Natural Gas 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.

AAA Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Oil Natural and AAA Technologies

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

The idea behind Oil Natural Gas and AAA Technologies Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.