Correlation Between Capricorn Energy and Somero Enterprise
Can any of the company-specific risk be diversified away by investing in both Capricorn Energy and Somero Enterprise 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 Capricorn Energy and Somero Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capricorn Energy PLC and Somero Enterprise, you can compare the effects of market volatilities on Capricorn Energy and Somero Enterprise 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 Capricorn Energy with a short position of Somero Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capricorn Energy and Somero Enterprise.
Diversification Opportunities for Capricorn Energy and Somero Enterprise
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capricorn and Somero is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Capricorn Energy PLC and Somero Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Somero Enterprise and Capricorn 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 Capricorn Energy PLC are associated (or correlated) with Somero Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Somero Enterprise has no effect on the direction of Capricorn Energy i.e., Capricorn Energy and Somero Enterprise go up and down completely randomly.
Pair Corralation between Capricorn Energy and Somero Enterprise
Assuming the 90 days trading horizon Capricorn Energy PLC is expected to generate 1.0 times more return on investment than Somero Enterprise. However, Capricorn Energy is 1.0 times more volatile than Somero Enterprise. It trades about 0.14 of its potential returns per unit of risk. Somero Enterprise is currently generating about 0.03 per unit of risk. If you would invest 22,450 in Capricorn Energy PLC on November 2, 2024 and sell it today you would earn a total of 8,950 from holding Capricorn Energy PLC or generate 39.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.06% |
| Values | Daily Returns |
Capricorn Energy PLC vs. Somero Enterprise
Performance |
| Timeline |
| Capricorn Energy PLC |
| Somero Enterprise |
Capricorn Energy and Somero Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capricorn Energy and Somero Enterprise
The main advantage of trading using opposite Capricorn Energy and Somero Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capricorn Energy position performs unexpectedly, Somero Enterprise 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 Somero Enterprise will offset losses from the drop in Somero Enterprise's long position.| Capricorn Energy vs. Zoom Video Communications | Capricorn Energy vs. Enbridge | Capricorn Energy vs. Endo International PLC | Capricorn Energy vs. Cornish Metals |
| Somero Enterprise vs. Anglo American PLC | Somero Enterprise vs. Vodafone Group PLC | Somero Enterprise vs. Prudential plc | Somero Enterprise vs. Unilever PLC |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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