Correlation Between Natural Gas and Source Energy
Can any of the company-specific risk be diversified away by investing in both Natural Gas and Source 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 Natural Gas and Source Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Gas Services and Source Energy Services, you can compare the effects of market volatilities on Natural Gas and Source 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 Natural Gas with a short position of Source Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and Source Energy.
Diversification Opportunities for Natural Gas and Source Energy
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Natural and Source is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and Source Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Energy Services and Natural Gas 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 Natural Gas Services are associated (or correlated) with Source Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Energy Services has no effect on the direction of Natural Gas i.e., Natural Gas and Source Energy go up and down completely randomly.
Pair Corralation between Natural Gas and Source Energy
Considering the 90-day investment horizon Natural Gas is expected to generate 1.15 times less return on investment than Source Energy. But when comparing it to its historical volatility, Natural Gas Services is 1.8 times less risky than Source Energy. It trades about 0.55 of its potential returns per unit of risk. Source Energy Services is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 890.00 in Source Energy Services on September 4, 2024 and sell it today you would earn a total of 403.00 from holding Source Energy Services or generate 45.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Gas Services vs. Source Energy Services
Performance |
| Timeline |
| Natural Gas Services |
| Source Energy Services |
Natural Gas and Source Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Gas and Source Energy
The main advantage of trading using opposite Natural Gas and Source Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Gas position performs unexpectedly, Source 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 Source Energy will offset losses from the drop in Source Energy's long position.| Natural Gas vs. Enerflex | Natural Gas vs. Forum Energy Technologies | Natural Gas vs. Archrock | Natural Gas vs. Geospace Technologies |
| Source Energy vs. Seadrill Limited | Source Energy vs. Noble plc | Source Energy vs. Borr Drilling | Source Energy vs. SCOR PK |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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