Correlation Between Energy Services and Firsthand Alternative
Can any of the company-specific risk be diversified away by investing in both Energy Services and Firsthand Alternative 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 Services and Firsthand Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services Fund and Firsthand Alternative Energy, you can compare the effects of market volatilities on Energy Services and Firsthand Alternative 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 Services with a short position of Firsthand Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Firsthand Alternative.
Diversification Opportunities for Energy Services and Firsthand Alternative
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Firsthand is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Firsthand Alternative Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Alternative and Energy Services 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 Services Fund are associated (or correlated) with Firsthand Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Alternative has no effect on the direction of Energy Services i.e., Energy Services and Firsthand Alternative go up and down completely randomly.
Pair Corralation between Energy Services and Firsthand Alternative
Assuming the 90 days horizon Energy Services Fund is expected to generate 1.06 times more return on investment than Firsthand Alternative. However, Energy Services is 1.06 times more volatile than Firsthand Alternative Energy. It trades about 0.0 of its potential returns per unit of risk. Firsthand Alternative Energy is currently generating about -0.03 per unit of risk. If you would invest 24,543 in Energy Services Fund on November 27, 2024 and sell it today you would lose (2,356) from holding Energy Services Fund or give up 9.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services Fund vs. Firsthand Alternative Energy
Performance |
| Timeline |
| Energy Services |
| Firsthand Alternative |
Energy Services and Firsthand Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Firsthand Alternative
The main advantage of trading using opposite Energy Services and Firsthand Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Firsthand Alternative 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 Firsthand Alternative will offset losses from the drop in Firsthand Alternative's long position.| Energy Services vs. Energy Fund Investor | Energy Services vs. Basic Materials Fund | Energy Services vs. Electronics Fund Investor | Energy Services vs. Health Care Fund |
| Firsthand Alternative vs. Guinness Atkinson Alternative | Firsthand Alternative vs. Calvert Global Energy | Firsthand Alternative vs. New Alternatives Fund | Firsthand Alternative vs. Shelton Green Alpha |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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