Correlation Between Environmental and CUE Energy
Can any of the company-specific risk be diversified away by investing in both Environmental and CUE 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 Environmental and CUE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Environmental Group and CUE Energy Resources, you can compare the effects of market volatilities on Environmental and CUE 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 Environmental with a short position of CUE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Environmental and CUE Energy.
Diversification Opportunities for Environmental and CUE Energy
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Environmental and CUE is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding The Environmental Group and CUE Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CUE Energy Resources and Environmental 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 The Environmental Group are associated (or correlated) with CUE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CUE Energy Resources has no effect on the direction of Environmental i.e., Environmental and CUE Energy go up and down completely randomly.
Pair Corralation between Environmental and CUE Energy
Assuming the 90 days trading horizon Environmental is expected to generate 1.63 times less return on investment than CUE Energy. But when comparing it to its historical volatility, The Environmental Group is 1.27 times less risky than CUE Energy. It trades about 0.04 of its potential returns per unit of risk. CUE Energy Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4.92 in CUE Energy Resources on September 3, 2024 and sell it today you would earn a total of 4.08 from holding CUE Energy Resources or generate 82.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Environmental Group vs. CUE Energy Resources
Performance |
| Timeline |
| The Environmental |
| CUE Energy Resources |
Environmental and CUE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Environmental and CUE Energy
The main advantage of trading using opposite Environmental and CUE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Environmental position performs unexpectedly, CUE 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 CUE Energy will offset losses from the drop in CUE Energy's long position.| Environmental vs. Jupiter Energy | Environmental vs. WA1 Resources | Environmental vs. Predictive Discovery | Environmental vs. Cooper Metals |
| CUE Energy vs. Charter Hall Retail | CUE Energy vs. Cleanaway Waste Management | CUE Energy vs. Super Retail Group | CUE Energy vs. Retail Food 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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