Correlation Between Energy Fund and Energy Services
Can any of the company-specific risk be diversified away by investing in both Energy Fund and Energy Services 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 Energy Fund and Energy Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Fund Class and Energy Services Fund, you can compare the effects of market volatilities on Energy Fund and Energy Services 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 Energy Fund with a short position of Energy Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Fund and Energy Services.
Diversification Opportunities for Energy Fund and Energy Services
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Energy and Energy is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Energy Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Services and Energy Fund 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 Energy Fund Class are associated (or correlated) with Energy Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Services has no effect on the direction of Energy Fund i.e., Energy Fund and Energy Services go up and down completely randomly.
Pair Corralation between Energy Fund and Energy Services
Assuming the 90 days horizon Energy Fund is expected to generate 1.69 times less return on investment than Energy Services. But when comparing it to its historical volatility, Energy Fund Class is 1.63 times less risky than Energy Services. It trades about 0.09 of its potential returns per unit of risk. Energy Services Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 17,734 in Energy Services Fund on October 20, 2024 and sell it today you would earn a total of 1,736 from holding Energy Services Fund or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Fund Class vs. Energy Services Fund
Performance |
| Timeline |
| Energy Fund Class |
| Energy Services |
Energy Fund and Energy Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Fund and Energy Services
The main advantage of trading using opposite Energy Fund and Energy Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Fund position performs unexpectedly, Energy Services 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 Services will offset losses from the drop in Energy Services' long position.| Energy Fund vs. Dreyfusstandish Global Fixed | Energy Fund vs. Morningstar Defensive Bond | Energy Fund vs. Doubleline Total Return | Energy Fund vs. Ambrus Core Bond |
| Energy Services vs. Barings High Yield | Energy Services vs. Georgia Tax Free Bond | Energy Services vs. Intermediate Term Bond Fund | Energy Services vs. Versatile Bond Portfolio |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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