Correlation Between World Energy and Equity Growth
Can any of the company-specific risk be diversified away by investing in both World Energy and Equity Growth 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 World Energy and Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Equity Growth Strategy, you can compare the effects of market volatilities on World Energy and Equity Growth 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 World Energy with a short position of Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Equity Growth.
Diversification Opportunities for World Energy and Equity Growth
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between World and Equity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Equity Growth Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth Strategy and World 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 World Energy Fund are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth Strategy has no effect on the direction of World Energy i.e., World Energy and Equity Growth go up and down completely randomly.
Pair Corralation between World Energy and Equity Growth
Assuming the 90 days horizon World Energy Fund is expected to generate 1.75 times more return on investment than Equity Growth. However, World Energy is 1.75 times more volatile than Equity Growth Strategy. It trades about 0.09 of its potential returns per unit of risk. Equity Growth Strategy is currently generating about 0.09 per unit of risk. If you would invest 1,361 in World Energy Fund on September 3, 2024 and sell it today you would earn a total of 185.00 from holding World Energy Fund or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Equity Growth Strategy
Performance |
| Timeline |
| World Energy |
| Equity Growth Strategy |
World Energy and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Equity Growth
The main advantage of trading using opposite World Energy and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Equity Growth 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| World Energy vs. Fisher Small Cap | World Energy vs. Rbc Small Cap | World Energy vs. Us Small Cap | World Energy vs. Oklahoma College Savings |
| Equity Growth vs. World Energy Fund | Equity Growth vs. Firsthand Alternative Energy | Equity Growth vs. Goehring Rozencwajg Resources | Equity Growth vs. Energy Basic Materials |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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