Correlation Between Salient Alternative and Energy Basic

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Salient Alternative and Energy Basic 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 Salient Alternative and Energy Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salient Alternative Beta and Energy Basic Materials, you can compare the effects of market volatilities on Salient Alternative and Energy Basic 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 Salient Alternative with a short position of Energy Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salient Alternative and Energy Basic.

Diversification Opportunities for Salient Alternative and Energy Basic

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Salient and Energy is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Salient Alternative Beta and Energy Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Basic Materials and Salient Alternative 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 Salient Alternative Beta are associated (or correlated) with Energy Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Basic Materials has no effect on the direction of Salient Alternative i.e., Salient Alternative and Energy Basic go up and down completely randomly.

Pair Corralation between Salient Alternative and Energy Basic

Assuming the 90 days horizon Salient Alternative Beta is expected to generate 0.97 times more return on investment than Energy Basic. However, Salient Alternative Beta is 1.03 times less risky than Energy Basic. It trades about -0.09 of its potential returns per unit of risk. Energy Basic Materials is currently generating about -0.23 per unit of risk. If you would invest  1,227  in Salient Alternative Beta on September 15, 2024 and sell it today you would lose (20.00) from holding Salient Alternative Beta or give up 1.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Salient Alternative Beta  vs.  Energy Basic Materials

 Performance 
       Timeline  
Salient Alternative Beta 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Salient Alternative Beta are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Salient Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Energy Basic Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Energy Basic Materials has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Energy Basic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Salient Alternative and Energy Basic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Salient Alternative and Energy Basic

The main advantage of trading using opposite Salient Alternative and Energy Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salient Alternative position performs unexpectedly, Energy Basic 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 Energy Basic will offset losses from the drop in Energy Basic's long position.
The idea behind Salient Alternative Beta and Energy Basic Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

Other Complementary Tools

Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets