Correlation Between Energy Services and Corporate Bond
Can any of the company-specific risk be diversified away by investing in both Energy Services and Corporate Bond 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 Corporate Bond 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 Corporate Bond Portfolio, you can compare the effects of market volatilities on Energy Services and Corporate Bond 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 Corporate Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Corporate Bond.
Diversification Opportunities for Energy Services and Corporate Bond
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between ENERGY and Corporate is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Corporate Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Bond Portfolio 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 Corporate Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Bond Portfolio has no effect on the direction of Energy Services i.e., Energy Services and Corporate Bond go up and down completely randomly.
Pair Corralation between Energy Services and Corporate Bond
Assuming the 90 days horizon Energy Services Fund is expected to generate 5.47 times more return on investment than Corporate Bond. However, Energy Services is 5.47 times more volatile than Corporate Bond Portfolio. It trades about 0.22 of its potential returns per unit of risk. Corporate Bond Portfolio is currently generating about 0.06 per unit of risk. If you would invest 22,044 in Energy Services Fund on August 31, 2024 and sell it today you would earn a total of 2,583 from holding Energy Services Fund or generate 11.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Energy Services Fund vs. Corporate Bond Portfolio
Performance |
| Timeline |
| Energy Services |
| Corporate Bond Portfolio |
Energy Services and Corporate Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Corporate Bond
The main advantage of trading using opposite Energy Services and Corporate Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Corporate Bond 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 Corporate Bond will offset losses from the drop in Corporate Bond'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 |
| Corporate Bond vs. Short Oil Gas | Corporate Bond vs. Energy Services Fund | Corporate Bond vs. Clearbridge Energy Mlp | Corporate Bond vs. Gmo Resources |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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