Correlation Between Summit Resources and Energy Resources
Can any of the company-specific risk be diversified away by investing in both Summit Resources and Energy Resources 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 Summit Resources and Energy Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Resources Limited and Energy Resources, you can compare the effects of market volatilities on Summit Resources and Energy Resources 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 Summit Resources with a short position of Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Resources and Energy Resources.
Diversification Opportunities for Summit Resources and Energy Resources
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Summit and Energy is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Summit Resources Limited and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Resources and Summit Resources 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 Summit Resources Limited are associated (or correlated) with Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of Summit Resources i.e., Summit Resources and Energy Resources go up and down completely randomly.
Pair Corralation between Summit Resources and Energy Resources
Assuming the 90 days trading horizon Summit Resources Limited is expected to generate 1.42 times more return on investment than Energy Resources. However, Summit Resources is 1.42 times more volatile than Energy Resources. It trades about 0.08 of its potential returns per unit of risk. Energy Resources is currently generating about 0.02 per unit of risk. If you would invest 0.40 in Summit Resources Limited on August 30, 2024 and sell it today you would lose (0.10) from holding Summit Resources Limited or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Summit Resources Limited vs. Energy Resources
Performance |
| Timeline |
| Summit Resources |
| Energy Resources |
Summit Resources and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Resources and Energy Resources
The main advantage of trading using opposite Summit Resources and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Resources position performs unexpectedly, Energy Resources 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 Resources will offset losses from the drop in Energy Resources' long position.| Summit Resources vs. Talisman Mining | Summit Resources vs. Hotel Property Investments | Summit Resources vs. Metro Mining | Summit Resources vs. MFF Capital Investments |
| Energy Resources vs. Dexus Convenience Retail | Energy Resources vs. Lendlease Group | Energy Resources vs. Aristocrat Leisure | Energy Resources vs. Clime Investment Management |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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