An almost daily occurrence in the life of a hedge fund analyst is understanding the impact of a potential event on specific stocks. Here are three examples of potential events and the questions it poses:
- I believe home sales may slow. What stocks are most likely to be impacted?
- I believe Gold may increase. What stocks could benefit from the increase?
- I believe Oil prices may fall. What stocks will be dragged down as a result?
Admit it. As a hedge fund analyst, you think you know the answers to these questions but don't actually know the answer based on real data.
To answer these precise questions with data, not with gut and intuition, Raltin runs 2.5 billion correlations on 40,000+ stocks, ETFs and mutual funds to find the most correlated securities for a given stock, ETF or mutual fund. The answers to these questions can be answered by simply searching for the relevant ETF that embodies the underlying event i.e. XHB (Home Sales), GLD (Gold) & USO (Oil) on Raltin.com
The below table shows the most correlated stocks or the most likely to get impacted for each of the questions posed earlier
5 MOST CORRELATED STOCKS TO XHB - HOMEBUILDERS INDEX
|Ticker||Stock Name||Correlation with XHB (Home Builder ETF)|
|TOL||Toll Brothers, Inc.||0.79|
|DHI||D.R. Horton, Inc.||0.78|
|MDC||M.D.C. Holdings, Inc.||0.77|
5 MOST CORRELATED STOCKS TO GLD- SPDR Gold Trust
|Ticker||Stock Name||Correlation with GLD (SPDR Gold Trust)|
|ASA||ASA Gold and Precious Metals Limited||0.74|
|ABX||Barrick Gold Corporation||0.72|
|AEM||Agnico Eagle Mines Limited||0.72|
5 MOST CORRELATED STOCKS TO USO - Oil Fund
|Ticker||Stock Name||Correlation with USO (Oil Fund ETF)|
|BTE||Baytex Energy Corp||0.69|
|VET||Vermilion Energy Inc.||0.68|
|CNQ||Canadian Natural Resources Limited||0.68|
After seeing the results, some of these results seem intuitive and obvious but others may seem surprising. For example, the canonical example for an Oil and equity pair trade was always Exxon Mobil (XOM). However, Raltin’s data shows that XOM has only a .53 correlation to USO Oil ETFs and prices.
So, the next time, someone at your fund comes up with a Peter Gregory type of sesame seeds type correlation question, just login to Raltin.com and get the answers in less than a minute.
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