Correlation Between Cardinal Energy and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both Cardinal Energy and Diversified 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 Cardinal Energy and Diversified Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Energy and Diversified Energy, you can compare the effects of market volatilities on Cardinal Energy and Diversified 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 Cardinal Energy with a short position of Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Energy and Diversified Energy.
Diversification Opportunities for Cardinal Energy and Diversified Energy
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cardinal and Diversified is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Energy and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy and Cardinal 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 Cardinal Energy are associated (or correlated) with Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Cardinal Energy i.e., Cardinal Energy and Diversified Energy go up and down completely randomly.
Pair Corralation between Cardinal Energy and Diversified Energy
Assuming the 90 days horizon Cardinal Energy is expected to generate 6.04 times less return on investment than Diversified Energy. But when comparing it to its historical volatility, Cardinal Energy is 1.63 times less risky than Diversified Energy. It trades about 0.02 of its potential returns per unit of risk. Diversified Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 115.00 in Diversified Energy on September 2, 2024 and sell it today you would earn a total of 6.00 from holding Diversified Energy or generate 5.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 7.8% |
| Values | Daily Returns |
Cardinal Energy vs. Diversified Energy
Performance |
| Timeline |
| Cardinal Energy |
| Diversified Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cardinal Energy and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Energy and Diversified Energy
The main advantage of trading using opposite Cardinal Energy and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Energy position performs unexpectedly, Diversified 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| Cardinal Energy vs. Tamarack Valley Energy | Cardinal Energy vs. Pine Cliff Energy | Cardinal Energy vs. MEG Energy Corp | Cardinal Energy vs. Headwater Exploration |
| Diversified Energy vs. Pieridae Energy Limited | Diversified Energy vs. Southern Cross Media | Diversified Energy vs. Prospera Energy | Diversified Energy vs. Ngx Energy International |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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