Correlation Between Energy and PMI
Can any of the company-specific risk be diversified away by investing in both Energy and PMI 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 Energy and PMI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy and Water and The PMI Group, you can compare the effects of market volatilities on Energy and PMI 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 Energy with a short position of PMI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy and PMI.
Diversification Opportunities for Energy and PMI
Pay attention - limited upside
The 3 months correlation between Energy and PMI is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Water and The PMI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMI Group and 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 Energy and Water are associated (or correlated) with PMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMI Group has no effect on the direction of Energy i.e., Energy and PMI go up and down completely randomly.
Pair Corralation between Energy and PMI
If you would invest 0.45 in Energy and Water on October 25, 2024 and sell it today you would lose (0.10) from holding Energy and Water or give up 22.22% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Energy and Water vs. The PMI Group
Performance |
Timeline |
Energy and Water |
PMI Group |
Energy and PMI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Energy and PMI
The main advantage of trading using opposite Energy and PMI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy position performs unexpectedly, PMI 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 PMI will offset losses from the drop in PMI's long position.Energy vs. Vow ASA | Energy vs. Eestech | Energy vs. One World Universe | Energy vs. Bion Environmental Technologies |
PMI vs. Ambac Financial Group | PMI vs. Assured Guaranty | PMI vs. Radian Group | PMI vs. MGIC Investment Corp |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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