Correlation Between Southern Energy and Arrow Exploration
Can any of the company-specific risk be diversified away by investing in both Southern Energy and Arrow Exploration 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 Southern Energy and Arrow Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Energy Corp and Arrow Exploration Corp, you can compare the effects of market volatilities on Southern Energy and Arrow Exploration 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 Southern Energy with a short position of Arrow Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Energy and Arrow Exploration.
Diversification Opportunities for Southern Energy and Arrow Exploration
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southern and Arrow is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Southern Energy Corp and Arrow Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Exploration Corp and Southern 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 Southern Energy Corp are associated (or correlated) with Arrow Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Exploration Corp has no effect on the direction of Southern Energy i.e., Southern Energy and Arrow Exploration go up and down completely randomly.
Pair Corralation between Southern Energy and Arrow Exploration
Assuming the 90 days horizon Southern Energy Corp is expected to under-perform the Arrow Exploration. In addition to that, Southern Energy is 1.42 times more volatile than Arrow Exploration Corp. It trades about -0.04 of its total potential returns per unit of risk. Arrow Exploration Corp is currently generating about 0.03 per unit of volatility. If you would invest 29.00 in Arrow Exploration Corp on December 1, 2024 and sell it today you would earn a total of 7.00 from holding Arrow Exploration Corp or generate 24.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Energy Corp vs. Arrow Exploration Corp
Performance |
| Timeline |
| Southern Energy Corp |
| Arrow Exploration Corp |
Southern Energy and Arrow Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Energy and Arrow Exploration
The main advantage of trading using opposite Southern Energy and Arrow Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Energy position performs unexpectedly, Arrow Exploration 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 Arrow Exploration will offset losses from the drop in Arrow Exploration's long position.| Southern Energy vs. Prospera Energy | Southern Energy vs. Pine Cliff Energy | Southern Energy vs. Lucero Energy Corp | Southern Energy vs. iShares Canadian HYBrid |
| Arrow Exploration vs. Southern Energy Corp | Arrow Exploration vs. Hemisphere Energy | Arrow Exploration vs. Prairie Provident Resources | Arrow Exploration vs. Vital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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