Correlation Between AER Energy and EnQuest PLC
Can any of the company-specific risk be diversified away by investing in both AER Energy and EnQuest PLC 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 AER Energy and EnQuest PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AER Energy Resources and EnQuest PLC, you can compare the effects of market volatilities on AER Energy and EnQuest PLC 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 AER Energy with a short position of EnQuest PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AER Energy and EnQuest PLC.
Diversification Opportunities for AER Energy and EnQuest PLC
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between AER and EnQuest is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding AER Energy Resources and EnQuest PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnQuest PLC and AER Energy 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 AER Energy Resources are associated (or correlated) with EnQuest PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnQuest PLC has no effect on the direction of AER Energy i.e., AER Energy and EnQuest PLC go up and down completely randomly.
Pair Corralation between AER Energy and EnQuest PLC
Given the investment horizon of 90 days AER Energy Resources is expected to generate 45.77 times more return on investment than EnQuest PLC. However, AER Energy is 45.77 times more volatile than EnQuest PLC. It trades about 0.21 of its potential returns per unit of risk. EnQuest PLC is currently generating about 0.02 per unit of risk. If you would invest 0.00 in AER Energy Resources on August 30, 2024 and sell it today you would earn a total of 0.01 from holding AER Energy Resources or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AER Energy Resources vs. EnQuest PLC
Performance |
| Timeline |
| AER Energy Resources |
| EnQuest PLC |
AER Energy and EnQuest PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AER Energy and EnQuest PLC
The main advantage of trading using opposite AER Energy and EnQuest PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AER Energy position performs unexpectedly, EnQuest PLC 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 EnQuest PLC will offset losses from the drop in EnQuest PLC's long position.| AER Energy vs. 1847 Holdings LLC | AER Energy vs. Westport Fuel Systems | AER Energy vs. Falcons Beyond Global, | AER Energy vs. Brookfield Business Partners |
| EnQuest PLC vs. Permian Resources | EnQuest PLC vs. Devon Energy | EnQuest PLC vs. EOG Resources | EnQuest PLC vs. Coterra Energy |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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