Correlation Between Energy Basic and City National
Can any of the company-specific risk be diversified away by investing in both Energy Basic and City National 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 Basic and City National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and City National Rochdale, you can compare the effects of market volatilities on Energy Basic and City National 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 Basic with a short position of City National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and City National.
Diversification Opportunities for Energy Basic and City National
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ENERGY and City is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and City National Rochdale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City National Rochdale and Energy Basic 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 Basic Materials are associated (or correlated) with City National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City National Rochdale has no effect on the direction of Energy Basic i.e., Energy Basic and City National go up and down completely randomly.
Pair Corralation between Energy Basic and City National
Assuming the 90 days horizon Energy Basic Materials is expected to generate 2.86 times more return on investment than City National. However, Energy Basic is 2.86 times more volatile than City National Rochdale. It trades about 0.07 of its potential returns per unit of risk. City National Rochdale is currently generating about 0.17 per unit of risk. If you would invest 1,023 in Energy Basic Materials on September 5, 2024 and sell it today you would earn a total of 12.00 from holding Energy Basic Materials or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. City National Rochdale
Performance |
| Timeline |
| Energy Basic Materials |
| City National Rochdale |
Energy Basic and City National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and City National
The main advantage of trading using opposite Energy Basic and City National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic position performs unexpectedly, City National 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 City National will offset losses from the drop in City National's long position.| Energy Basic vs. Salient Alternative Beta | Energy Basic vs. Aggressive Balanced Allocation | Energy Basic vs. Salient Alternative Beta | Energy Basic vs. Moderately Aggressive Balanced |
| City National vs. Franklin Natural Resources | City National vs. Energy Basic Materials | City National vs. World Energy Fund | City National vs. Goehring Rozencwajg Resources |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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