Correlation Between AER Energy and Epsilon Energy
Can any of the company-specific risk be diversified away by investing in both AER Energy and Epsilon Energy 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 Epsilon Energy 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 Epsilon Energy, you can compare the effects of market volatilities on AER Energy and Epsilon Energy 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 Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AER Energy and Epsilon Energy.
Diversification Opportunities for AER Energy and Epsilon Energy
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between AER and Epsilon is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AER Energy Resources and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy 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 Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of AER Energy i.e., AER Energy and Epsilon Energy go up and down completely randomly.
Pair Corralation between AER Energy and Epsilon Energy
Given the investment horizon of 90 days AER Energy Resources is expected to generate 36.29 times more return on investment than Epsilon Energy. However, AER Energy is 36.29 times more volatile than Epsilon Energy. It trades about 0.06 of its potential returns per unit of risk. Epsilon Energy is currently generating about 0.05 per unit of risk. If you would invest 0.01 in AER Energy Resources on August 26, 2024 and sell it today you would earn a total of 0.00 from holding AER Energy Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AER Energy Resources vs. Epsilon Energy
Performance |
| Timeline |
| AER Energy Resources |
| Epsilon Energy |
AER Energy and Epsilon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AER Energy and Epsilon Energy
The main advantage of trading using opposite AER Energy and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AER Energy position performs unexpectedly, Epsilon Energy 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 Epsilon Energy will offset losses from the drop in Epsilon Energy's long position.| AER Energy vs. Caduceus Software Systems | AER Energy vs. North Springs Resources | AER Energy vs. Nyxio Tech Corp | AER Energy vs. Access Power Co |
| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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