Correlation Between Essential Energy and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Essential Energy and Natural Gas 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 Natural Gas 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 Natural Gas Services, you can compare the effects of market volatilities on Essential Energy and Natural Gas 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 Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Energy and Natural Gas.
Diversification Opportunities for Essential Energy and Natural Gas
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Essential and Natural is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Essential Energy Services and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Essential Energy i.e., Essential Energy and Natural Gas go up and down completely randomly.
Pair Corralation between Essential Energy and Natural Gas
If you would invest 1,990 in Natural Gas Services on September 4, 2024 and sell it today you would earn a total of 802.00 from holding Natural Gas Services or generate 40.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Essential Energy Services vs. Natural Gas Services
Performance |
| Timeline |
| Essential Energy Services |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Natural Gas Services |
Essential Energy and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essential Energy and Natural Gas
The main advantage of trading using opposite Essential Energy and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Energy position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' 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 |
| Natural Gas vs. Enerflex | Natural Gas vs. Forum Energy Technologies | Natural Gas vs. Archrock | Natural Gas vs. Geospace Technologies |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |