Correlation Between Oil Natural and Bosch

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Can any of the company-specific risk be diversified away by investing in both Oil Natural and Bosch 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 Bosch 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 Bosch Limited, you can compare the effects of market volatilities on Oil Natural and Bosch 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 Bosch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Natural and Bosch.

Diversification Opportunities for Oil Natural and Bosch

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Oil and Bosch is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Bosch Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bosch Limited 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 Bosch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bosch Limited has no effect on the direction of Oil Natural i.e., Oil Natural and Bosch go up and down completely randomly.

Pair Corralation between Oil Natural and Bosch

Assuming the 90 days trading horizon Oil Natural Gas is expected to under-perform the Bosch. But the stock apears to be less risky and, when comparing its historical volatility, Oil Natural Gas is 1.09 times less risky than Bosch. The stock trades about -0.24 of its potential returns per unit of risk. The Bosch Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,670,330  in Bosch Limited on September 24, 2024 and sell it today you would lose (212,635) from holding Bosch Limited or give up 5.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

Oil Natural Gas  vs.  Bosch Limited

 Performance 
       Timeline  
Oil Natural Gas 

Risk-Adjusted Performance

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Strong
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 conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Bosch Limited 

Risk-Adjusted Performance

0 of 100

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

Oil Natural and Bosch Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oil Natural and Bosch

The main advantage of trading using opposite Oil Natural and Bosch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Natural position performs unexpectedly, Bosch 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 Bosch will offset losses from the drop in Bosch's long position.
The idea behind Oil Natural Gas and Bosch 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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