Correlation Between Energy Services and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Energy Services and Commodities Strategy 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 Commodities Strategy 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 Commodities Strategy Fund, you can compare the effects of market volatilities on Energy Services and Commodities Strategy 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 Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Commodities Strategy.
Diversification Opportunities for Energy Services and Commodities Strategy
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Commodities is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy 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 Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Energy Services i.e., Energy Services and Commodities Strategy go up and down completely randomly.
Pair Corralation between Energy Services and Commodities Strategy
Assuming the 90 days horizon Energy Services Fund is expected to generate 1.64 times more return on investment than Commodities Strategy. However, Energy Services is 1.64 times more volatile than Commodities Strategy Fund. It trades about 0.02 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.02 per unit of risk. If you would invest 23,431 in Energy Services Fund on August 28, 2024 and sell it today you would earn a total of 1,231 from holding Energy Services Fund or generate 5.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services Fund vs. Commodities Strategy Fund
Performance |
| Timeline |
| Energy Services |
| Commodities Strategy |
Energy Services and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Commodities Strategy
The main advantage of trading using opposite Energy Services and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Commodities Strategy 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 Commodities Strategy will offset losses from the drop in Commodities Strategy'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 |
| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Energy Services Fund | Commodities Strategy vs. Energy Fund Investor | Commodities Strategy vs. Real Estate 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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