Correlation Between Southern Energy and Pulse Oil
Can any of the company-specific risk be diversified away by investing in both Southern Energy and Pulse Oil 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 Pulse Oil 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 Pulse Oil Corp, you can compare the effects of market volatilities on Southern Energy and Pulse Oil 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 Pulse Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Energy and Pulse Oil.
Diversification Opportunities for Southern Energy and Pulse Oil
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Pulse is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Southern Energy Corp and Pulse Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulse Oil 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 Pulse Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulse Oil Corp has no effect on the direction of Southern Energy i.e., Southern Energy and Pulse Oil go up and down completely randomly.
Pair Corralation between Southern Energy and Pulse Oil
Assuming the 90 days horizon Southern Energy Corp is expected to under-perform the Pulse Oil. But the stock apears to be less risky and, when comparing its historical volatility, Southern Energy Corp is 2.0 times less risky than Pulse Oil. The stock trades about -0.08 of its potential returns per unit of risk. The Pulse Oil Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Pulse Oil Corp on September 12, 2024 and sell it today you would lose (5.50) from holding Pulse Oil Corp or give up 78.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Energy Corp vs. Pulse Oil Corp
Performance |
| Timeline |
| Southern Energy Corp |
| Pulse Oil Corp |
Southern Energy and Pulse Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Energy and Pulse Oil
The main advantage of trading using opposite Southern Energy and Pulse Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Energy position performs unexpectedly, Pulse Oil 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 Pulse Oil will offset losses from the drop in Pulse Oil's long position.| Southern Energy vs. Enbridge Pref 5 | Southern Energy vs. Enbridge Pref 11 | Southern Energy vs. Enbridge Pref L | Southern Energy vs. E Split Corp |
| Pulse Oil vs. Prairie Provident Resources | Pulse Oil vs. Prospera Energy | Pulse Oil vs. Southern Energy Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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