Correlation Between San Juan and Houston American
Can any of the company-specific risk be diversified away by investing in both San Juan and Houston American 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 San Juan and Houston American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between San Juan Basin and Houston American Energy, you can compare the effects of market volatilities on San Juan and Houston American 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 San Juan with a short position of Houston American. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Juan and Houston American.
Diversification Opportunities for San Juan and Houston American
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between San and Houston is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Houston American Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houston American Energy and San Juan 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 San Juan Basin are associated (or correlated) with Houston American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Houston American Energy has no effect on the direction of San Juan i.e., San Juan and Houston American go up and down completely randomly.
Pair Corralation between San Juan and Houston American
Considering the 90-day investment horizon San Juan is expected to generate 1.67 times less return on investment than Houston American. But when comparing it to its historical volatility, San Juan Basin is 2.29 times less risky than Houston American. It trades about 0.05 of its potential returns per unit of risk. Houston American Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 134.00 in Houston American Energy on September 1, 2024 and sell it today you would earn a total of 5.00 from holding Houston American Energy or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
San Juan Basin vs. Houston American Energy
Performance |
| Timeline |
| San Juan Basin |
| Houston American Energy |
San Juan and Houston American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with San Juan and Houston American
The main advantage of trading using opposite San Juan and Houston American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Juan position performs unexpectedly, Houston American 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 Houston American will offset losses from the drop in Houston American's long position.| San Juan vs. Sabine Royalty Trust | San Juan vs. Permian Basin Royalty | San Juan vs. Cross Timbers Royalty | San Juan vs. Mesa Royalty Trust |
| Houston American vs. Indonesia Energy | Houston American vs. Imperial Petroleum | Houston American vs. Nine Energy Service | Houston American vs. Camber Energy |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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