Correlation Between Hess and FS Energy
Can any of the company-specific risk be diversified away by investing in both Hess and FS 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 Hess and FS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and FS Energy and, you can compare the effects of market volatilities on Hess and FS 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 Hess with a short position of FS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and FS Energy.
Diversification Opportunities for Hess and FS Energy
Very good diversification
The 3 months correlation between Hess and FSEN is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and FS Energy and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Energy and Hess 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 Hess Corporation are associated (or correlated) with FS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Energy has no effect on the direction of Hess i.e., Hess and FS Energy go up and down completely randomly.
Pair Corralation between Hess and FS Energy
Considering the 90-day investment horizon Hess Corporation is expected to generate 0.3 times more return on investment than FS Energy. However, Hess Corporation is 3.33 times less risky than FS Energy. It trades about 0.07 of its potential returns per unit of risk. FS Energy and is currently generating about -0.06 per unit of risk. If you would invest 13,639 in Hess Corporation on November 4, 2024 and sell it today you would earn a total of 264.00 from holding Hess Corporation or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Corp. vs. FS Energy and
Performance |
| Timeline |
| Hess |
| FS Energy |
Hess and FS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess and FS Energy
The main advantage of trading using opposite Hess and FS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess position performs unexpectedly, FS 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 FS Energy will offset losses from the drop in FS Energy's long position.The idea behind Hess Corporation and FS Energy and 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.| FS Energy vs. Business Development Corp | FS Energy vs. Inpex Corp ADR | FS Energy vs. Daikin IndustriesLtd |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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