Correlation Between Expand Energy and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both Expand Energy and Diversified 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 Expand Energy and Diversified Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expand Energy and Diversified Energy, you can compare the effects of market volatilities on Expand Energy and Diversified 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 Expand Energy with a short position of Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expand Energy and Diversified Energy.
Diversification Opportunities for Expand Energy and Diversified Energy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Expand and Diversified is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Expand Energy and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy and Expand Energy 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 Expand Energy are associated (or correlated) with Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Expand Energy i.e., Expand Energy and Diversified Energy go up and down completely randomly.
Pair Corralation between Expand Energy and Diversified Energy
Considering the 90-day investment horizon Expand Energy is expected to generate 1.87 times less return on investment than Diversified Energy. But when comparing it to its historical volatility, Expand Energy is 1.21 times less risky than Diversified Energy. It trades about 0.25 of its potential returns per unit of risk. Diversified Energy is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 1,138 in Diversified Energy on August 31, 2024 and sell it today you would earn a total of 485.00 from holding Diversified Energy or generate 42.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Expand Energy vs. Diversified Energy
Performance |
| Timeline |
| Expand Energy |
| Diversified Energy |
Expand Energy and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Expand Energy and Diversified Energy
The main advantage of trading using opposite Expand Energy and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expand Energy position performs unexpectedly, Diversified 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| Expand Energy vs. Shoe Carnival | Expand Energy vs. Acco Brands | Expand Energy vs. Figs Inc | Expand Energy vs. Videolocity International |
| Diversified Energy vs. Evolution Petroleum | Diversified Energy vs. Ring Energy | Diversified Energy vs. Gran Tierra Energy | Diversified Energy vs. Permian Resources |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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