Correlation Between SDX Energy and Otto Energy
Can any of the company-specific risk be diversified away by investing in both SDX Energy and Otto 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 Otto 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 Otto Energy Limited, you can compare the effects of market volatilities on SDX Energy and Otto 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 Otto Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SDX Energy and Otto Energy.
Diversification Opportunities for SDX Energy and Otto Energy
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SDX and Otto is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SDX Energy plc and Otto Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otto Energy Limited 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 Otto Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otto Energy Limited has no effect on the direction of SDX Energy i.e., SDX Energy and Otto Energy go up and down completely randomly.
Pair Corralation between SDX Energy and Otto Energy
Assuming the 90 days horizon SDX Energy plc is expected to generate 2.31 times more return on investment than Otto Energy. However, SDX Energy is 2.31 times more volatile than Otto Energy Limited. It trades about 0.02 of its potential returns per unit of risk. Otto Energy Limited is currently generating about -0.21 per unit of risk. If you would invest 1.92 in SDX Energy plc on September 1, 2024 and sell it today you would lose (1.21) from holding SDX Energy plc or give up 63.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SDX Energy plc vs. Otto Energy Limited
Performance |
| Timeline |
| SDX Energy plc |
| Otto Energy Limited |
SDX Energy and Otto Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SDX Energy and Otto Energy
The main advantage of trading using opposite SDX Energy and Otto Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SDX Energy position performs unexpectedly, Otto 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 Otto Energy will offset losses from the drop in Otto Energy's long position.| SDX Energy vs. Permian Resources | SDX Energy vs. Devon Energy | SDX Energy vs. EOG Resources | SDX Energy vs. Coterra Energy |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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