Correlation Between Energy Resources and Advanced Braking
Can any of the company-specific risk be diversified away by investing in both Energy Resources and Advanced Braking 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 Resources and Advanced Braking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Resources and Advanced Braking Technology, you can compare the effects of market volatilities on Energy Resources and Advanced Braking 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 Resources with a short position of Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and Advanced Braking.
Diversification Opportunities for Energy Resources and Advanced Braking
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Energy and Advanced is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and Energy Resources 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 Resources are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of Energy Resources i.e., Energy Resources and Advanced Braking go up and down completely randomly.
Pair Corralation between Energy Resources and Advanced Braking
Assuming the 90 days trading horizon Energy Resources is expected to generate 5.5 times more return on investment than Advanced Braking. However, Energy Resources is 5.5 times more volatile than Advanced Braking Technology. It trades about 0.24 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.11 per unit of risk. If you would invest 0.20 in Energy Resources on October 22, 2024 and sell it today you would earn a total of 0.10 from holding Energy Resources or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Resources vs. Advanced Braking Technology
Performance |
| Timeline |
| Energy Resources |
| Advanced Braking Tec |
Energy Resources and Advanced Braking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Resources and Advanced Braking
The main advantage of trading using opposite Energy Resources and Advanced Braking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources position performs unexpectedly, Advanced Braking 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 Advanced Braking will offset losses from the drop in Advanced Braking's long position.| Energy Resources vs. Red Hill Iron | Energy Resources vs. TPG Telecom | Energy Resources vs. The Environmental Group | Energy Resources vs. Medical Developments International |
| Advanced Braking vs. Energy Resources | Advanced Braking vs. A1 Investments Resources | Advanced Braking vs. Hutchison Telecommunications | Advanced Braking vs. Tigers Realm Coal |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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