Correlation Between EA Series and Energy Select
Can any of the company-specific risk be diversified away by investing in both EA Series and Energy Select 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 EA Series and Energy Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EA Series Trust and Energy Select Sector, you can compare the effects of market volatilities on EA Series and Energy Select 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 EA Series with a short position of Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and Energy Select.
Diversification Opportunities for EA Series and Energy Select
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SHOC and Energy is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector and EA Series 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 EA Series Trust are associated (or correlated) with Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of EA Series i.e., EA Series and Energy Select go up and down completely randomly.
Pair Corralation between EA Series and Energy Select
Given the investment horizon of 90 days EA Series Trust is expected to under-perform the Energy Select. In addition to that, EA Series is 1.7 times more volatile than Energy Select Sector. It trades about -0.05 of its total potential returns per unit of risk. Energy Select Sector is currently generating about 0.35 per unit of volatility. If you would invest 8,977 in Energy Select Sector on August 26, 2024 and sell it today you would earn a total of 750.00 from holding Energy Select Sector or generate 8.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EA Series Trust vs. Energy Select Sector
Performance |
| Timeline |
| EA Series Trust |
| Energy Select Sector |
EA Series and Energy Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EA Series and Energy Select
The main advantage of trading using opposite EA Series and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series position performs unexpectedly, Energy Select 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 Energy Select will offset losses from the drop in Energy Select's long position.The idea behind EA Series Trust and Energy Select Sector pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy Select vs. Utilities Select Sector |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |