Correlation Between Energy Resources and IXUP
Can any of the company-specific risk be diversified away by investing in both Energy Resources and IXUP 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 IXUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Resources and IXUP, you can compare the effects of market volatilities on Energy Resources and IXUP 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 IXUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and IXUP.
Diversification Opportunities for Energy Resources and IXUP
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and IXUP is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and IXUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXUP 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 IXUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXUP has no effect on the direction of Energy Resources i.e., Energy Resources and IXUP go up and down completely randomly.
Pair Corralation between Energy Resources and IXUP
Assuming the 90 days trading horizon Energy Resources is expected to generate 3.91 times more return on investment than IXUP. However, Energy Resources is 3.91 times more volatile than IXUP. It trades about 0.08 of its potential returns per unit of risk. IXUP is currently generating about 0.04 per unit of risk. If you would invest 0.30 in Energy Resources on September 1, 2024 and sell it today you would lose (0.10) from holding Energy Resources or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Energy Resources vs. IXUP
Performance |
| Timeline |
| Energy Resources |
| IXUP |
Energy Resources and IXUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Resources and IXUP
The main advantage of trading using opposite Energy Resources and IXUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources position performs unexpectedly, IXUP 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 IXUP will offset losses from the drop in IXUP's long position.| Energy Resources vs. Clime Investment Management | Energy Resources vs. Hotel Property Investments | Energy Resources vs. Charter Hall Retail | Energy Resources vs. Garda Diversified Ppty |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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