Correlation Between Security Investment and Oil

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

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

Diversification Opportunities for Security Investment and Oil

0.17

Correlation Coefficient

Security Investment  Oil

Average diversification

The 3 months correlation between Security and Oil is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Security Investment Bank and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and Security Investment 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 Security Investment Bank are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Security Investment i.e., Security Investment and Oil go up and down completely randomly.

Pair Corralation between Security Investment and Oil

Assuming the 90 days trading horizon Security Investment Bank is expected to generate 2.82 times more return on investment than Oil. However, Security Investment is 2.82 times more volatile than Oil and Gas. It trades about 0.07 of its potential returns per unit of risk. Oil and Gas is currently generating about 0.11 per unit of risk. If you would invest  295.00  in Security Investment Bank on September 12, 2024 and sell it today you would earn a total of  193.00  from holding Security Investment Bank or generate 65.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.78%
Values	Daily Returns

Security Investment Bank  vs.  Oil and Gas

Security Investment Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Security Investment Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Security Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oil and Gas

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oil and Gas are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Security Investment and Oil

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

The idea behind Security Investment Bank and Oil and Gas 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.