Correlation Between FAR and Enwell Energy
Can any of the company-specific risk be diversified away by investing in both FAR and Enwell 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 FAR and Enwell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAR Limited and Enwell Energy plc, you can compare the effects of market volatilities on FAR and Enwell 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 FAR with a short position of Enwell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAR and Enwell Energy.
Diversification Opportunities for FAR and Enwell Energy
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FAR and Enwell is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FAR Limited and Enwell Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enwell Energy plc and FAR 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 FAR Limited are associated (or correlated) with Enwell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enwell Energy plc has no effect on the direction of FAR i.e., FAR and Enwell Energy go up and down completely randomly.
Pair Corralation between FAR and Enwell Energy
Assuming the 90 days horizon FAR is expected to generate 4.68 times less return on investment than Enwell Energy. But when comparing it to its historical volatility, FAR Limited is 3.68 times less risky than Enwell Energy. It trades about 0.03 of its potential returns per unit of risk. Enwell Energy plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 36.00 in Enwell Energy plc on August 25, 2024 and sell it today you would lose (12.00) from holding Enwell Energy plc or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAR Limited vs. Enwell Energy plc
Performance |
| Timeline |
| FAR Limited |
| Enwell Energy plc |
FAR and Enwell Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAR and Enwell Energy
The main advantage of trading using opposite FAR and Enwell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAR position performs unexpectedly, Enwell 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 Enwell Energy will offset losses from the drop in Enwell Energy's long position.The idea behind FAR Limited and Enwell Energy plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Enwell Energy vs. Permian Resources | Enwell Energy vs. Devon Energy | Enwell Energy vs. EOG Resources | Enwell Energy vs. Coterra Energy |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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