Correlation Between Secure Energy and PHX Energy
Can any of the company-specific risk be diversified away by investing in both Secure Energy and PHX 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 Secure Energy and PHX Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Secure Energy Services and PHX Energy Services, you can compare the effects of market volatilities on Secure Energy and PHX 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 Secure Energy with a short position of PHX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Secure Energy and PHX Energy.
Diversification Opportunities for Secure Energy and PHX Energy
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Secure and PHX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Secure Energy Services and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services and Secure 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 Secure Energy Services are associated (or correlated) with PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Secure Energy i.e., Secure Energy and PHX Energy go up and down completely randomly.
Pair Corralation between Secure Energy and PHX Energy
Assuming the 90 days trading horizon Secure Energy is expected to generate 2.25 times less return on investment than PHX Energy. But when comparing it to its historical volatility, Secure Energy Services is 1.64 times less risky than PHX Energy. It trades about 0.08 of its potential returns per unit of risk. PHX Energy Services is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 933.00 in PHX Energy Services on September 1, 2024 and sell it today you would earn a total of 46.00 from holding PHX Energy Services or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Secure Energy Services vs. PHX Energy Services
Performance |
| Timeline |
| Secure Energy Services |
| PHX Energy Services |
Secure Energy and PHX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Secure Energy and PHX Energy
The main advantage of trading using opposite Secure Energy and PHX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Secure Energy position performs unexpectedly, PHX 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 PHX Energy will offset losses from the drop in PHX Energy's long position.| Secure Energy vs. CES Energy Solutions | Secure Energy vs. Ensign Energy Services | Secure Energy vs. Enerflex | Secure Energy vs. Pason Systems |
| PHX Energy vs. CES Energy Solutions | PHX Energy vs. Total Energy Services | PHX Energy vs. Western Energy Services |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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