Correlation Between IXUP and Energy Resources
Can any of the company-specific risk be diversified away by investing in both IXUP and Energy Resources 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 IXUP and Energy Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IXUP and Energy Resources, you can compare the effects of market volatilities on IXUP and Energy Resources 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 IXUP with a short position of Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of IXUP and Energy Resources.
Diversification Opportunities for IXUP and Energy Resources
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IXUP and Energy is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding IXUP and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Resources and IXUP 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 IXUP are associated (or correlated) with Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of IXUP i.e., IXUP and Energy Resources go up and down completely randomly.
Pair Corralation between IXUP and Energy Resources
Assuming the 90 days trading horizon IXUP is expected to under-perform the Energy Resources. But the stock apears to be less risky and, when comparing its historical volatility, IXUP is 2.01 times less risky than Energy Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Energy Resources is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Energy Resources on August 29, 2024 and sell it today you would lose (5.70) from holding Energy Resources or give up 95.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IXUP vs. Energy Resources
Performance |
| Timeline |
| IXUP |
| Energy Resources |
IXUP and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IXUP and Energy Resources
The main advantage of trading using opposite IXUP and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IXUP position performs unexpectedly, Energy Resources 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 Energy Resources will offset losses from the drop in Energy Resources' long position.The idea behind IXUP and Energy Resources 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.| Energy Resources vs. Vulcan Steel | Energy Resources vs. Red Hill Iron | Energy Resources vs. Ramsay Health Care | Energy Resources vs. Singular Health Group |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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