Correlation Between CES Energy and North American
Can any of the company-specific risk be diversified away by investing in both CES Energy and North American 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 CES Energy and North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CES Energy Solutions and North American Construction, you can compare the effects of market volatilities on CES Energy and North American 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 CES Energy with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of CES Energy and North American.
Diversification Opportunities for CES Energy and North American
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CES and North is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CES Energy Solutions and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and CES 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 CES Energy Solutions are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of CES Energy i.e., CES Energy and North American go up and down completely randomly.
Pair Corralation between CES Energy and North American
Assuming the 90 days trading horizon CES Energy Solutions is expected to under-perform the North American. But the stock apears to be less risky and, when comparing its historical volatility, CES Energy Solutions is 1.8 times less risky than North American. The stock trades about -0.09 of its potential returns per unit of risk. The North American Construction is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,943 in North American Construction on October 20, 2024 and sell it today you would earn a total of 15.00 from holding North American Construction or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CES Energy Solutions vs. North American Construction
Performance |
| Timeline |
| CES Energy Solutions |
| North American Const |
CES Energy and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CES Energy and North American
The main advantage of trading using opposite CES Energy and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CES Energy position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| CES Energy vs. Secure Energy Services | CES Energy vs. Ensign Energy Services | CES Energy vs. Kelt Exploration | CES Energy vs. Trican Well Service |
| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
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 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.
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