Correlation Between Sound Energy and Prairie Provident
Can any of the company-specific risk be diversified away by investing in both Sound Energy and Prairie Provident 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 Sound Energy and Prairie Provident into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Energy plc and Prairie Provident Resources, you can compare the effects of market volatilities on Sound Energy and Prairie Provident 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 Sound Energy with a short position of Prairie Provident. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Energy and Prairie Provident.
Diversification Opportunities for Sound Energy and Prairie Provident
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sound and Prairie is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sound Energy plc and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident and Sound 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 Sound Energy plc are associated (or correlated) with Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Sound Energy i.e., Sound Energy and Prairie Provident go up and down completely randomly.
Pair Corralation between Sound Energy and Prairie Provident
If you would invest 2.50 in Prairie Provident Resources on September 1, 2024 and sell it today you would lose (0.10) from holding Prairie Provident Resources or give up 4.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sound Energy plc vs. Prairie Provident Resources
Performance |
| Timeline |
| Sound Energy plc |
| Prairie Provident |
Sound Energy and Prairie Provident Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Energy and Prairie Provident
The main advantage of trading using opposite Sound Energy and Prairie Provident positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Energy position performs unexpectedly, Prairie Provident 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 Prairie Provident will offset losses from the drop in Prairie Provident's long position.| Sound Energy vs. Permian Resources | Sound Energy vs. Devon Energy | Sound Energy vs. EOG Resources | Sound Energy vs. Coterra Energy |
| Prairie Provident vs. San Leon Energy | Prairie Provident vs. Enwell Energy plc | Prairie Provident vs. Dno ASA | Prairie Provident vs. Questerre 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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