Correlation Between Oil Equipment and Hashicorp

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

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

Diversification Opportunities for Oil Equipment and Hashicorp

0.35

Correlation Coefficient

Oil Equipment  Hashicorp

Weak diversification

The 3 months correlation between Oil and Hashicorp is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Oil Equipment Services and Hashicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hashicorp and Oil Equipment 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 Equipment Services are associated (or correlated) with Hashicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hashicorp has no effect on the direction of Oil Equipment i.e., Oil Equipment and Hashicorp go up and down completely randomly.

Pair Corralation between Oil Equipment and Hashicorp

Assuming the 90 days horizon Oil Equipment is expected to generate 2.03 times less return on investment than Hashicorp. But when comparing it to its historical volatility, Oil Equipment Services is 1.99 times less risky than Hashicorp. It trades about 0.16 of its potential returns per unit of risk. Hashicorp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,269  in Hashicorp on February 19, 2024 and sell it today you would earn a total of  1,035  from holding Hashicorp or generate 45.61% return on investment over 90 days.

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

Oil Equipment Services  vs.  Hashicorp

Oil Equipment Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Equipment Services are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Oil Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

Hashicorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hashicorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Hashicorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil Equipment and Hashicorp

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

The idea behind Oil Equipment Services and Hashicorp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.