Correlation Between Oil Equipment and Mid Cap

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

Diversification Opportunities for Oil Equipment and Mid Cap

0.75

Correlation Coefficient

Oil Equipment  Mid Cap

Poor diversification

The 3 months correlation between Oil and Mid is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Oil Equipment Services and Mid Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Oil Equipment i.e., Oil Equipment and Mid Cap go up and down completely randomly.

Pair Corralation between Oil Equipment and Mid Cap

Assuming the 90 days horizon Oil Equipment Services is expected to generate 3.05 times more return on investment than Mid Cap. However, Oil Equipment is 3.05 times more volatile than Mid Cap Value Profund. It trades about 0.14 of its potential returns per unit of risk. Mid Cap Value Profund is currently generating about 0.11 per unit of risk. If you would invest  5,395  in Oil Equipment Services on May 3, 2025 and sell it today you would earn a total of  1,439  from holding Oil Equipment Services or generate 26.67% return on investment over 90 days.

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

Oil Equipment Services  vs.  Mid Cap Value Profund

Oil Equipment Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Equipment Services are ranked lower than 10 (%) 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.

Mid Cap Value

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value Profund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Oil Equipment and Mid Cap

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

The idea behind Oil Equipment Services and Mid Cap Value Profund 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.