Correlation Between Element Solutions and Select Energy
Can any of the company-specific risk be diversified away by investing in both Element Solutions and Select 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 Element Solutions and Select Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Element Solutions and Select Energy Services, you can compare the effects of market volatilities on Element Solutions and Select 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 Element Solutions with a short position of Select Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and Select Energy.
Diversification Opportunities for Element Solutions and Select Energy
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Element and Select is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services and Element Solutions 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 Element Solutions are associated (or correlated) with Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Element Solutions i.e., Element Solutions and Select Energy go up and down completely randomly.
Pair Corralation between Element Solutions and Select Energy
Considering the 90-day investment horizon Element Solutions is expected to generate 1.76 times less return on investment than Select Energy. But when comparing it to its historical volatility, Element Solutions is 1.46 times less risky than Select Energy. It trades about 0.07 of its potential returns per unit of risk. Select Energy Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,077 in Select Energy Services on August 24, 2024 and sell it today you would earn a total of 381.00 from holding Select Energy Services or generate 35.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Element Solutions vs. Select Energy Services
Performance |
| Timeline |
| Element Solutions |
| Select Energy Services |
Element Solutions and Select Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Element Solutions and Select Energy
The main advantage of trading using opposite Element Solutions and Select Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions position performs unexpectedly, Select 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 Select Energy will offset losses from the drop in Select Energy's long position.| Element Solutions vs. Oil Dri | Element Solutions vs. Quaker Chemical | Element Solutions vs. Ecovyst | Element Solutions vs. Minerals Technologies |
| Select Energy vs. Orion Engineered Carbons | Select Energy vs. Element Solutions | Select Energy vs. Kronos Worldwide | Select Energy vs. FutureFuel 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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