Correlation Between Energy Services and Intermediate Government
Can any of the company-specific risk be diversified away by investing in both Energy Services and Intermediate Government 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 Intermediate Government 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 Intermediate Government Bond, you can compare the effects of market volatilities on Energy Services and Intermediate Government 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 Intermediate Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Intermediate Government.
Diversification Opportunities for Energy Services and Intermediate Government
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Energy and Intermediate is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Intermediate Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Government 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 Intermediate Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Government has no effect on the direction of Energy Services i.e., Energy Services and Intermediate Government go up and down completely randomly.
Pair Corralation between Energy Services and Intermediate Government
Assuming the 90 days horizon Energy Services Fund is expected to under-perform the Intermediate Government. In addition to that, Energy Services is 18.39 times more volatile than Intermediate Government Bond. It trades about 0.0 of its total potential returns per unit of risk. Intermediate Government Bond is currently generating about 0.08 per unit of volatility. If you would invest 945.00 in Intermediate Government Bond on November 7, 2024 and sell it today you would earn a total of 1.00 from holding Intermediate Government Bond or generate 0.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Energy Services Fund vs. Intermediate Government Bond
Performance |
| Timeline |
| Energy Services |
| Intermediate Government |
Energy Services and Intermediate Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Intermediate Government
The main advantage of trading using opposite Energy Services and Intermediate Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Intermediate Government 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 Intermediate Government will offset losses from the drop in Intermediate Government'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 |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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