Correlation Between Oil Refineries and NewMed Energy
Can any of the company-specific risk be diversified away by investing in both Oil Refineries and NewMed Energy 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 NewMed Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Refineries and NewMed Energy , you can compare the effects of market volatilities on Oil Refineries and NewMed Energy 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 NewMed Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Refineries and NewMed Energy.
Diversification Opportunities for Oil Refineries and NewMed Energy
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Oil and NewMed is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Oil Refineries and NewMed Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMed Energy 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 NewMed Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMed Energy has no effect on the direction of Oil Refineries i.e., Oil Refineries and NewMed Energy go up and down completely randomly.
Pair Corralation between Oil Refineries and NewMed Energy
Assuming the 90 days trading horizon Oil Refineries is expected to under-perform the NewMed Energy. But the stock apears to be less risky and, when comparing its historical volatility, Oil Refineries is 1.15 times less risky than NewMed Energy. The stock trades about -0.01 of its potential returns per unit of risk. The NewMed Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 76,699 in NewMed Energy on September 24, 2024 and sell it today you would earn a total of 37,301 from holding NewMed Energy or generate 48.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Oil Refineries vs. NewMed Energy
Performance |
Timeline |
Oil Refineries |
NewMed Energy |
Oil Refineries and NewMed Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Oil Refineries and NewMed Energy
The main advantage of trading using opposite Oil Refineries and NewMed Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Refineries position performs unexpectedly, NewMed Energy 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 NewMed Energy will offset losses from the drop in NewMed Energy's long position.Oil Refineries vs. Atreyu Capital Markets | Oil Refineries vs. IBI Inv House | Oil Refineries vs. Delek Automotive Systems | Oil Refineries vs. Scope Metals Group |
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Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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