Correlation Between Energy and Renewal Fuels
Can any of the company-specific risk be diversified away by investing in both Energy and Renewal Fuels 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 Renewal Fuels 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 Renewal Fuels, you can compare the effects of market volatilities on Energy and Renewal Fuels 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 Renewal Fuels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy and Renewal Fuels.
Diversification Opportunities for Energy and Renewal Fuels
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Renewal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Water and Renewal Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renewal Fuels 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 Renewal Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renewal Fuels has no effect on the direction of Energy i.e., Energy and Renewal Fuels go up and down completely randomly.
Pair Corralation between Energy and Renewal Fuels
Given the investment horizon of 90 days Energy and Water is expected to generate 1.26 times more return on investment than Renewal Fuels. However, Energy is 1.26 times more volatile than Renewal Fuels. It trades about 0.01 of its potential returns per unit of risk. Renewal Fuels is currently generating about -0.02 per unit of risk. If you would invest 5.06 in Energy and Water on September 3, 2024 and sell it today you would lose (4.93) from holding Energy and Water or give up 97.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Energy and Water vs. Renewal Fuels
Performance |
| Timeline |
| Energy and Water |
| Renewal Fuels |
Energy and Renewal Fuels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy and Renewal Fuels
The main advantage of trading using opposite Energy and Renewal Fuels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy position performs unexpectedly, Renewal Fuels 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 Renewal Fuels will offset losses from the drop in Renewal Fuels' long position.| Energy vs. Vow ASA | Energy vs. Eestech | Energy vs. One World Universe | Energy vs. Bion Environmental Technologies |
| Renewal Fuels vs. C Bond Systems | Renewal Fuels vs. Lhyfe SA | Renewal Fuels vs. Industrial Nanotech | Renewal Fuels vs. CN Energy Group |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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