Correlation Between Essential Energy and CES Energy
Can any of the company-specific risk be diversified away by investing in both Essential Energy and CES 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 Essential Energy and CES Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essential Energy Services and CES Energy Solutions, you can compare the effects of market volatilities on Essential Energy and CES 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 Essential Energy with a short position of CES Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Energy and CES Energy.
Diversification Opportunities for Essential Energy and CES Energy
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Essential and CES is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Essential Energy Services and CES Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CES Energy Solutions and Essential 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 Essential Energy Services are associated (or correlated) with CES Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CES Energy Solutions has no effect on the direction of Essential Energy i.e., Essential Energy and CES Energy go up and down completely randomly.
Pair Corralation between Essential Energy and CES Energy
If you would invest 501.00 in CES Energy Solutions on September 3, 2024 and sell it today you would earn a total of 193.00 from holding CES Energy Solutions or generate 38.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.8% |
| Values | Daily Returns |
Essential Energy Services vs. CES Energy Solutions
Performance |
| Timeline |
| Essential Energy Services |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| CES Energy Solutions |
Essential Energy and CES Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essential Energy and CES Energy
The main advantage of trading using opposite Essential Energy and CES Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Energy position performs unexpectedly, CES 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 CES Energy will offset losses from the drop in CES Energy's long position.| Essential Energy vs. Source Energy Services | Essential Energy vs. Total Energy Services | Essential Energy vs. Trican Well Service | Essential Energy vs. STEP Energy Services |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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