Correlation Between Energy and Thermal Energy
Can any of the company-specific risk be diversified away by investing in both Energy and Thermal 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 Energy and Thermal Energy 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 Thermal Energy International, you can compare the effects of market volatilities on Energy and Thermal 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 Energy with a short position of Thermal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy and Thermal Energy.
Diversification Opportunities for Energy and Thermal Energy
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Energy and Thermal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Water and Thermal Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermal Energy Inter 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 Thermal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermal Energy Inter has no effect on the direction of Energy i.e., Energy and Thermal Energy go up and down completely randomly.
Pair Corralation between Energy and Thermal Energy
Given the investment horizon of 90 days Energy and Water is expected to generate 5.84 times more return on investment than Thermal Energy. However, Energy is 5.84 times more volatile than Thermal Energy International. It trades about 0.25 of its potential returns per unit of risk. Thermal Energy International is currently generating about 0.02 per unit of risk. If you would invest 0.16 in Energy and Water on October 8, 2024 and sell it today you would earn a total of 0.14 from holding Energy and Water or generate 87.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Energy and Water vs. Thermal Energy International
Performance |
| Timeline |
| Energy and Water |
| Thermal Energy Inter |
Energy and Thermal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy and Thermal Energy
The main advantage of trading using opposite Energy and Thermal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy position performs unexpectedly, Thermal 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 Thermal Energy will offset losses from the drop in Thermal Energy's long position.| Energy vs. Vow ASA | Energy vs. Eestech | Energy vs. One World Universe | Energy vs. Bion Environmental Technologies |
| Thermal Energy vs. Vertical Aerospace | Thermal Energy vs. Rolls Royce Holdings plc | Thermal Energy vs. Embraer SA ADR | Thermal Energy vs. Rocket Lab USA |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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