Correlation Between Energy Services and Great Lakes
Can any of the company-specific risk be diversified away by investing in both Energy Services and Great Lakes 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 Services and Great Lakes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services and Great Lakes Dredge, you can compare the effects of market volatilities on Energy Services and Great Lakes 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 Services with a short position of Great Lakes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Great Lakes.
Diversification Opportunities for Energy Services and Great Lakes
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energy and Great is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services and Great Lakes Dredge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Lakes Dredge and Energy Services 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 Services are associated (or correlated) with Great Lakes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Lakes Dredge has no effect on the direction of Energy Services i.e., Energy Services and Great Lakes go up and down completely randomly.
Pair Corralation between Energy Services and Great Lakes
Given the investment horizon of 90 days Energy Services is expected to generate 1.48 times more return on investment than Great Lakes. However, Energy Services is 1.48 times more volatile than Great Lakes Dredge. It trades about 0.45 of its potential returns per unit of risk. Great Lakes Dredge is currently generating about 0.16 per unit of risk. If you would invest 1,159 in Energy Services on August 30, 2024 and sell it today you would earn a total of 416.00 from holding Energy Services or generate 35.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services vs. Great Lakes Dredge
Performance |
| Timeline |
| Energy Services |
| Great Lakes Dredge |
Energy Services and Great Lakes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Great Lakes
The main advantage of trading using opposite Energy Services and Great Lakes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Great Lakes 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 Great Lakes will offset losses from the drop in Great Lakes' long position.| Energy Services vs. Bouygues SA | Energy Services vs. NV5 Global | Energy Services vs. Matrix Service Co | Energy Services vs. MYR Group |
| Great Lakes vs. Primoris Services | Great Lakes vs. Granite Construction Incorporated | Great Lakes vs. MYR Group | Great Lakes vs. Southland Holdings |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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