Correlation Between Energy Resources and Coles
Can any of the company-specific risk be diversified away by investing in both Energy Resources and Coles 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 Coles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Resources and Coles Group, you can compare the effects of market volatilities on Energy Resources and Coles 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 Coles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and Coles.
Diversification Opportunities for Energy Resources and Coles
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Energy and Coles is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group 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 Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Energy Resources i.e., Energy Resources and Coles go up and down completely randomly.
Pair Corralation between Energy Resources and Coles
Assuming the 90 days trading horizon Energy Resources is expected to generate 50.36 times more return on investment than Coles. However, Energy Resources is 50.36 times more volatile than Coles Group. It trades about 0.13 of its potential returns per unit of risk. Coles Group is currently generating about 0.12 per unit of risk. If you would invest 0.25 in Energy Resources on October 14, 2024 and sell it today you would earn a total of 0.05 from holding Energy Resources or generate 20.0% 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. Coles Group
Performance |
| Timeline |
| Energy Resources |
| Coles Group |
Energy Resources and Coles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Resources and Coles
The main advantage of trading using opposite Energy Resources and Coles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources position performs unexpectedly, Coles 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 Coles will offset losses from the drop in Coles' long position.| Energy Resources vs. Retail Food Group | Energy Resources vs. Regal Funds Management | Energy Resources vs. Firstwave Cloud Technology | Energy Resources vs. Macquarie Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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