Correlation Between Energy Services and Short-intermediate
Can any of the company-specific risk be diversified away by investing in both Energy Services and Short-intermediate 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 Short-intermediate 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 Short Intermediate Bond Fund, you can compare the effects of market volatilities on Energy Services and Short-intermediate 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 Short-intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Short-intermediate.
Diversification Opportunities for Energy Services and Short-intermediate
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between ENERGY and Short-intermediate is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Short Intermediate Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Intermediate Bond 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 Short-intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Intermediate Bond has no effect on the direction of Energy Services i.e., Energy Services and Short-intermediate go up and down completely randomly.
Pair Corralation between Energy Services and Short-intermediate
Assuming the 90 days horizon Energy Services Fund is expected to generate 21.52 times more return on investment than Short-intermediate. However, Energy Services is 21.52 times more volatile than Short Intermediate Bond Fund. It trades about 0.22 of its potential returns per unit of risk. Short Intermediate Bond Fund is currently generating about 0.1 per unit of risk. If you would invest 22,166 in Energy Services Fund on September 1, 2024 and sell it today you would earn a total of 2,461 from holding Energy Services Fund or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services Fund vs. Short Intermediate Bond Fund
Performance |
| Timeline |
| Energy Services |
| Short Intermediate Bond |
Energy Services and Short-intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Short-intermediate
The main advantage of trading using opposite Energy Services and Short-intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Short-intermediate 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 Short-intermediate will offset losses from the drop in Short-intermediate's long position.| Energy Services vs. Basic Materials Fund | Energy Services vs. Electronics Fund Investor | Energy Services vs. Health Care Fund | Energy Services vs. Precious Metals Fund |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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