Correlation Between Bear Profund and Oil Equipment

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

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

Diversification Opportunities for Bear Profund and Oil Equipment

-0.59

Correlation Coefficient

Bear Profund  Oil Equipment

Excellent diversification

The 3 months correlation between Bear and Oil is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bear Profund Bear and Oil Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Equipment Services and Bear Profund 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 Bear Profund Bear are associated (or correlated) with Oil Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Equipment Services has no effect on the direction of Bear Profund i.e., Bear Profund and Oil Equipment go up and down completely randomly.

Pair Corralation between Bear Profund and Oil Equipment

Assuming the 90 days horizon Bear Profund Bear is expected to under-perform the Oil Equipment. But the mutual fund apears to be less risky and, when comparing its historical volatility, Bear Profund Bear is 3.46 times less risky than Oil Equipment. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Oil Equipment Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,625  in Oil Equipment Services on January 30, 2024 and sell it today you would earn a total of  470.00  from holding Oil Equipment Services or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bear Profund Bear  vs.  Oil Equipment Services

Bear Profund Bear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bear Profund Bear has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Bear Profund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oil Equipment Services

Risk-Adjusted Performance

8 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Equipment Services are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oil Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bear Profund and Oil Equipment

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

The idea behind Bear Profund Bear and Oil Equipment Services 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.