Correlation Between Oil Refineries and Airtouch Solar

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

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

Diversification Opportunities for Oil Refineries and Airtouch Solar

-0.57

Correlation Coefficient

Oil Refineries  Airtouch Solar

Excellent diversification

The 3 months correlation between Oil and Airtouch is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Oil Refineries and Airtouch Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airtouch Solar and Oil Refineries 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 Refineries are associated (or correlated) with Airtouch Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airtouch Solar has no effect on the direction of Oil Refineries i.e., Oil Refineries and Airtouch Solar go up and down completely randomly.

Pair Corralation between Oil Refineries and Airtouch Solar

Assuming the 90 days trading horizon Oil Refineries is expected to generate 0.46 times more return on investment than Airtouch Solar. However, Oil Refineries is 2.19 times less risky than Airtouch Solar. It trades about -0.01 of its potential returns per unit of risk. Airtouch Solar is currently generating about -0.1 per unit of risk. If you would invest  9,480  in Oil Refineries on September 4, 2024 and sell it today you would lose (80.00) from holding Oil Refineries or give up 0.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Oil Refineries  vs.  Airtouch Solar

Oil Refineries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Refineries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Oil Refineries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Airtouch Solar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airtouch Solar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Oil Refineries and Airtouch Solar

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

The idea behind Oil Refineries and Airtouch Solar 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.