Correlation Between Thermal Energy and Energy
Can any of the company-specific risk be diversified away by investing in both Thermal Energy and 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 Thermal Energy and Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thermal Energy International and Energy and Water, you can compare the effects of market volatilities on Thermal Energy and 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 Thermal Energy with a short position of Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermal Energy and Energy.
Diversification Opportunities for Thermal Energy and Energy
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Thermal and Energy is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Thermal Energy International and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water and Thermal 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 Thermal Energy International are associated (or correlated) with Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Thermal Energy i.e., Thermal Energy and Energy go up and down completely randomly.
Pair Corralation between Thermal Energy and Energy
Assuming the 90 days horizon Thermal Energy is expected to generate 91.83 times less return on investment than Energy. But when comparing it to its historical volatility, Thermal Energy International is 5.84 times less risky than Energy. It trades about 0.02 of its potential returns per unit of risk. Energy and Water is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 0.16 in Energy and Water on October 8, 2024 and sell it today you would earn a total of 0.14 from holding Energy and Water or generate 87.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Thermal Energy International vs. Energy and Water
Performance |
| Timeline |
| Thermal Energy Inter |
| Energy and Water |
Thermal Energy and Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thermal Energy and Energy
The main advantage of trading using opposite Thermal Energy and Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermal Energy position performs unexpectedly, 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 Energy will offset losses from the drop in Energy's long position.| Thermal Energy vs. Vertical Aerospace | Thermal Energy vs. Rolls Royce Holdings plc | Thermal Energy vs. Embraer SA ADR | Thermal Energy vs. Rocket Lab USA |
| Energy vs. Vow ASA | Energy vs. Eestech | Energy vs. One World Universe | Energy vs. Bion Environmental Technologies |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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