Correlation Between Source Energy and Total Energy
Can any of the company-specific risk be diversified away by investing in both Source Energy and Total Energy 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 Source Energy and Total Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Source Energy Services and Total Energy Services, you can compare the effects of market volatilities on Source Energy and Total Energy 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 Source Energy with a short position of Total Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Source Energy and Total Energy.
Diversification Opportunities for Source Energy and Total Energy
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Source and Total is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Source Energy Services and Total Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Energy Services and Source Energy 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 Source Energy Services are associated (or correlated) with Total Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Energy Services has no effect on the direction of Source Energy i.e., Source Energy and Total Energy go up and down completely randomly.
Pair Corralation between Source Energy and Total Energy
Assuming the 90 days horizon Source Energy Services is expected to generate 3.19 times more return on investment than Total Energy. However, Source Energy is 3.19 times more volatile than Total Energy Services. It trades about 0.34 of its potential returns per unit of risk. Total Energy Services is currently generating about 0.54 per unit of risk. If you would invest 890.00 in Source Energy Services on September 1, 2024 and sell it today you would earn a total of 403.00 from holding Source Energy Services or generate 45.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Source Energy Services vs. Total Energy Services
Performance |
| Timeline |
| Source Energy Services |
| Total Energy Services |
Source Energy and Total Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Source Energy and Total Energy
The main advantage of trading using opposite Source Energy and Total Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Source Energy position performs unexpectedly, Total Energy 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 Total Energy will offset losses from the drop in Total Energy's long position.| Source Energy vs. Petroleo Brasileiro Petrobras | Source Energy vs. Equinor ASA ADR | Source Energy vs. Eni SpA ADR | Source Energy vs. YPF Sociedad Anonima |
| Total Energy vs. Source Energy Services | Total Energy vs. Trican Well Service | Total Energy vs. STEP Energy Services | Total Energy vs. Koil Energy Solutions |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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