Correlation Between Arena Star and Bazan Oil
Can any of the company-specific risk be diversified away by investing in both Arena Star and Bazan 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 Arena Star and Bazan Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arena Star Group and Bazan Oil Refineries, you can compare the effects of market volatilities on Arena Star and Bazan 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 Arena Star with a short position of Bazan Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arena Star and Bazan Oil.
Diversification Opportunities for Arena Star and Bazan Oil
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Arena and Bazan is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Arena Star Group and Bazan Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bazan Oil Refineries and Arena Star 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 Arena Star Group are associated (or correlated) with Bazan Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bazan Oil Refineries has no effect on the direction of Arena Star i.e., Arena Star and Bazan Oil go up and down completely randomly.
Pair Corralation between Arena Star and Bazan Oil
Assuming the 90 days trading horizon Arena Star Group is expected to generate 2.0 times more return on investment than Bazan Oil. However, Arena Star is 2.0 times more volatile than Bazan Oil Refineries. It trades about -0.31 of its potential returns per unit of risk. Bazan Oil Refineries is currently generating about -0.91 per unit of risk. If you would invest 24,640 in Arena Star Group on January 25, 2024 and sell it today you would lose (2,420) from holding Arena Star Group or give up 9.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arena Star Group vs. Bazan Oil Refineries
Performance |
| Timeline |
| Arena Star Group |
| Bazan Oil Refineries |
Arena Star and Bazan Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arena Star and Bazan Oil
The main advantage of trading using opposite Arena Star and Bazan Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arena Star position performs unexpectedly, Bazan 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 Bazan Oil will offset losses from the drop in Bazan Oil's long position.The idea behind Arena Star Group and Bazan Oil Refineries 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.| Bazan Oil vs. Fattal 1998 Holdings | Bazan Oil vs. El Al Israel | Bazan Oil vs. Bank Leumi Le Israel | Bazan Oil vs. Teva Pharmaceutical Industries |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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