Correlation Between North European and Sound Energy
Can any of the company-specific risk be diversified away by investing in both North European and Sound 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 North European and Sound Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North European Oil and Sound Energy plc, you can compare the effects of market volatilities on North European and Sound 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 North European with a short position of Sound Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of North European and Sound Energy.
Diversification Opportunities for North European and Sound Energy
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between North and Sound is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding North European Oil and Sound Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Energy plc and North European 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 North European Oil are associated (or correlated) with Sound Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Energy plc has no effect on the direction of North European i.e., North European and Sound Energy go up and down completely randomly.
Pair Corralation between North European and Sound Energy
Considering the 90-day investment horizon North European Oil is expected to generate 36.28 times more return on investment than Sound Energy. However, North European is 36.28 times more volatile than Sound Energy plc. It trades about 0.02 of its potential returns per unit of risk. Sound Energy plc is currently generating about 0.21 per unit of risk. If you would invest 451.00 in North European Oil on November 3, 2024 and sell it today you would earn a total of 1.00 from holding North European Oil or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
North European Oil vs. Sound Energy plc
Performance |
| Timeline |
| North European Oil |
| Sound Energy plc |
North European and Sound Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North European and Sound Energy
The main advantage of trading using opposite North European and Sound Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North European position performs unexpectedly, Sound 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 Sound Energy will offset losses from the drop in Sound Energy's long position.| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
| Sound Energy vs. Cgrowth Capital | Sound Energy vs. Energy Revenue Amer | Sound Energy vs. Prairie Provident Resources | Sound Energy vs. MMEX Resources Corp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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