Correlation Between Oil Natural and Sterling

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

Diversification Opportunities for Oil Natural and Sterling

0.63

Correlation Coefficient

Oil Natural  Sterling

Poor diversification

The 3 months correlation between Oil and Sterling is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Sterling and Wilson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling and Wilson 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 Sterling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling and Wilson has no effect on the direction of Oil Natural i.e., Oil Natural and Sterling go up and down completely randomly.

Pair Corralation between Oil Natural and Sterling

Assuming the 90 days trading horizon Oil Natural is expected to generate 13.53 times less return on investment than Sterling. But when comparing it to its historical volatility, Oil Natural Gas is 2.39 times less risky than Sterling. It trades about 0.02 of its potential returns per unit of risk. Sterling and Wilson is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  28,070  in Sterling and Wilson on April 16, 2025 and sell it today you would earn a total of  5,385  from holding Sterling and Wilson or generate 19.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Oil Natural Gas  vs.  Sterling and Wilson

Oil Natural Gas

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sterling and Wilson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling and Wilson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent essential indicators, Sterling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil Natural and Sterling

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

The idea behind Oil Natural Gas and Sterling and Wilson 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.