Correlation Between SSE PLC and Energy Of
Can any of the company-specific risk be diversified away by investing in both SSE PLC and Energy Of 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 SSE PLC and Energy Of into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSE PLC ADR and Energy of Minas, you can compare the effects of market volatilities on SSE PLC and Energy Of 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 SSE PLC with a short position of Energy Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSE PLC and Energy Of.
Diversification Opportunities for SSE PLC and Energy Of
Modest diversification
The 3 months correlation between SSE and Energy is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SSE PLC ADR and Energy of Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy of Minas and SSE PLC 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 SSE PLC ADR are associated (or correlated) with Energy Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy of Minas has no effect on the direction of SSE PLC i.e., SSE PLC and Energy Of go up and down completely randomly.
Pair Corralation between SSE PLC and Energy Of
Assuming the 90 days horizon SSE PLC ADR is expected to generate 0.47 times more return on investment than Energy Of. However, SSE PLC ADR is 2.13 times less risky than Energy Of. It trades about -0.06 of its potential returns per unit of risk. Energy of Minas is currently generating about -0.12 per unit of risk. If you would invest 2,280 in SSE PLC ADR on September 4, 2024 and sell it today you would lose (35.00) from holding SSE PLC ADR or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSE PLC ADR vs. Energy of Minas
Performance |
| Timeline |
| SSE PLC ADR |
| Energy of Minas |
SSE PLC and Energy Of Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSE PLC and Energy Of
The main advantage of trading using opposite SSE PLC and Energy Of positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSE PLC position performs unexpectedly, Energy Of 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 Of will offset losses from the drop in Energy Of's long position.The idea behind SSE PLC ADR and Energy of Minas pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Energy Of vs. Atco | Energy Of vs. AuraSource | Energy Of vs. Canadian Utilities Limited | Energy Of vs. Engie SA ADR |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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