Correlation Between STEP Energy and Total Energy
Can any of the company-specific risk be diversified away by investing in both STEP Energy and Total Energy 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 STEP Energy and Total Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STEP Energy Services and Total Energy Services, you can compare the effects of market volatilities on STEP Energy and Total Energy 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 STEP Energy with a short position of Total Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEP Energy and Total Energy.
Diversification Opportunities for STEP Energy and Total Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between STEP and Total is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding STEP Energy Services and Total Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Energy Services and STEP 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 STEP Energy Services are associated (or correlated) with Total Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Energy Services has no effect on the direction of STEP Energy i.e., STEP Energy and Total Energy go up and down completely randomly.
Pair Corralation between STEP Energy and Total Energy
Assuming the 90 days horizon STEP Energy Services is expected to generate 3.66 times more return on investment than Total Energy. However, STEP Energy is 3.66 times more volatile than Total Energy Services. It trades about 0.08 of its potential returns per unit of risk. Total Energy Services is currently generating about 0.2 per unit of risk. If you would invest 297.00 in STEP Energy Services on September 3, 2024 and sell it today you would earn a total of 68.00 from holding STEP Energy Services or generate 22.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
STEP Energy Services vs. Total Energy Services
Performance |
| Timeline |
| STEP Energy Services |
| Total Energy Services |
STEP Energy and Total Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STEP Energy and Total Energy
The main advantage of trading using opposite STEP Energy and Total Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEP Energy position performs unexpectedly, Total Energy 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 Total Energy will offset losses from the drop in Total Energy's long position.| STEP Energy vs. Total Energy Services | STEP Energy vs. Trican Well Service | STEP Energy vs. Koil Energy Solutions | STEP Energy vs. TerraVest Industries |
| Total Energy vs. Source Energy Services | Total Energy vs. Trican Well Service | Total Energy vs. STEP Energy Services | Total Energy vs. Koil Energy Solutions |
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.
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