Correlation Between SDX Energy and Prospera Energy
Can any of the company-specific risk be diversified away by investing in both SDX Energy and Prospera 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 SDX Energy and Prospera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SDX Energy plc and Prospera Energy, you can compare the effects of market volatilities on SDX Energy and Prospera 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 SDX Energy with a short position of Prospera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SDX Energy and Prospera Energy.
Diversification Opportunities for SDX Energy and Prospera Energy
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SDX and Prospera is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SDX Energy plc and Prospera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospera Energy and SDX 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 SDX Energy plc are associated (or correlated) with Prospera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospera Energy has no effect on the direction of SDX Energy i.e., SDX Energy and Prospera Energy go up and down completely randomly.
Pair Corralation between SDX Energy and Prospera Energy
Assuming the 90 days horizon SDX Energy plc is expected to generate 7.22 times more return on investment than Prospera Energy. However, SDX Energy is 7.22 times more volatile than Prospera Energy. It trades about 0.09 of its potential returns per unit of risk. Prospera Energy is currently generating about -0.09 per unit of risk. If you would invest 0.98 in SDX Energy plc on September 3, 2024 and sell it today you would lose (0.27) from holding SDX Energy plc or give up 27.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
SDX Energy plc vs. Prospera Energy
Performance |
| Timeline |
| SDX Energy plc |
| Prospera Energy |
SDX Energy and Prospera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SDX Energy and Prospera Energy
The main advantage of trading using opposite SDX Energy and Prospera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SDX Energy position performs unexpectedly, Prospera 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 Prospera Energy will offset losses from the drop in Prospera Energy's long position.| SDX Energy vs. 1st NRG Corp | SDX Energy vs. Petro Viking Energy | SDX Energy vs. Otto Energy Limited | SDX Energy vs. Empire Petroleum Corp |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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