Correlation Between PHLX Oil and IAC

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

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

Diversification Opportunities for PHLX Oil and IAC

0.66

Correlation Coefficient

PHLX Oil  IAC

Poor diversification

The 3 months correlation between PHLX and IAC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PHLX Oil Service and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc and PHLX Oil 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 PHLX Oil Service are associated (or correlated) with IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of PHLX Oil i.e., PHLX Oil and IAC go up and down completely randomly.

Pair Corralation between PHLX Oil and IAC

Assuming the 90 days trading horizon PHLX Oil is expected to generate 1.13 times less return on investment than IAC. In addition to that, PHLX Oil is 1.01 times more volatile than IAC Inc. It trades about 0.1 of its total potential returns per unit of risk. IAC Inc is currently generating about 0.11 per unit of volatility. If you would invest  3,579  in IAC Inc on April 29, 2025 and sell it today you would earn a total of  486.00  from holding IAC Inc or generate 13.58% return on investment over 90 days.

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

PHLX Oil Service  vs.  IAC Inc

Pair Trading with PHLX Oil and IAC

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

The idea behind PHLX Oil Service and IAC Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.