Correlation Between ENEX Energy and Basic Energy
Can any of the company-specific risk be diversified away by investing in both ENEX Energy and Basic 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 ENEX Energy and Basic Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ENEX Energy Corp and Basic Energy Corp, you can compare the effects of market volatilities on ENEX Energy and Basic 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 ENEX Energy with a short position of Basic Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENEX Energy and Basic Energy.
Diversification Opportunities for ENEX Energy and Basic Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENEX and Basic is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ENEX Energy Corp and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp and ENEX 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 ENEX Energy Corp are associated (or correlated) with Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of ENEX Energy i.e., ENEX Energy and Basic Energy go up and down completely randomly.
Pair Corralation between ENEX Energy and Basic Energy
Assuming the 90 days trading horizon ENEX Energy Corp is expected to generate 2.33 times more return on investment than Basic Energy. However, ENEX Energy is 2.33 times more volatile than Basic Energy Corp. It trades about 0.02 of its potential returns per unit of risk. Basic Energy Corp is currently generating about -0.06 per unit of risk. If you would invest 443.00 in ENEX Energy Corp on September 1, 2024 and sell it today you would lose (18.00) from holding ENEX Energy Corp or give up 4.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.6% |
| Values | Daily Returns |
ENEX Energy Corp vs. Basic Energy Corp
Performance |
| Timeline |
| ENEX Energy Corp |
| Basic Energy Corp |
ENEX Energy and Basic Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ENEX Energy and Basic Energy
The main advantage of trading using opposite ENEX Energy and Basic Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENEX Energy position performs unexpectedly, Basic 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 Basic Energy will offset losses from the drop in Basic Energy's long position.| ENEX Energy vs. Oriental Petroleum and | ENEX Energy vs. Oriental Petroleum and | ENEX Energy vs. Basic Energy Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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