Correlation Between Source Energy and Bri Chem
Can any of the company-specific risk be diversified away by investing in both Source Energy and Bri Chem 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 Bri Chem 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 Bri Chem Corp, you can compare the effects of market volatilities on Source Energy and Bri Chem 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 Bri Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Source Energy and Bri Chem.
Diversification Opportunities for Source Energy and Bri Chem
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Source and Bri is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Source Energy Services and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp 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 Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of Source Energy i.e., Source Energy and Bri Chem go up and down completely randomly.
Pair Corralation between Source Energy and Bri Chem
Assuming the 90 days trading horizon Source Energy Services is expected to under-perform the Bri Chem. But the stock apears to be less risky and, when comparing its historical volatility, Source Energy Services is 2.3 times less risky than Bri Chem. The stock trades about -0.38 of its potential returns per unit of risk. The Bri Chem Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 37.00 in Bri Chem Corp on October 13, 2024 and sell it today you would lose (1.00) from holding Bri Chem Corp or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Source Energy Services vs. Bri Chem Corp
Performance |
| Timeline |
| Source Energy Services |
| Bri Chem Corp |
Source Energy and Bri Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Source Energy and Bri Chem
The main advantage of trading using opposite Source Energy and Bri Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Source Energy position performs unexpectedly, Bri Chem 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 Bri Chem will offset losses from the drop in Bri Chem's long position.| Source Energy vs. STEP Energy Services | Source Energy vs. Calfrac Well Services | Source Energy vs. InPlay Oil Corp | Source Energy vs. Yangarra 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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