Correlation Between Now and Total Energy
Can any of the company-specific risk be diversified away by investing in both Now and Total 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 Now and Total Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Inc and Total Energy Services, you can compare the effects of market volatilities on Now and Total 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 Now with a short position of Total Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Total Energy.
Diversification Opportunities for Now and Total Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Now and Total is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Total Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Energy Services and Now 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 Now Inc are associated (or correlated) with Total Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Energy Services has no effect on the direction of Now i.e., Now and Total Energy go up and down completely randomly.
Pair Corralation between Now and Total Energy
Given the investment horizon of 90 days Now is expected to generate 1.79 times less return on investment than Total Energy. But when comparing it to its historical volatility, Now Inc is 1.0 times less risky than Total Energy. It trades about 0.05 of its potential returns per unit of risk. Total Energy Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 666.00 in Total Energy Services on September 3, 2024 and sell it today you would earn a total of 168.00 from holding Total Energy Services or generate 25.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Now Inc vs. Total Energy Services
Performance |
| Timeline |
| Now Inc |
| Total Energy Services |
Now and Total Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Now and Total Energy
The main advantage of trading using opposite Now and Total Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now position performs unexpectedly, Total 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 Total Energy will offset losses from the drop in Total Energy's long position.| Now vs. Oil States International | Now vs. Oceaneering International | Now vs. Geospace Technologies | Now vs. Newpark Resources |
| Total Energy vs. Source Energy Services | Total Energy vs. Trican Well Service | Total Energy vs. STEP Energy Services | Total Energy vs. Koil Energy Solutions |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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