Correlation Between Total Energy and High Arctic
Can any of the company-specific risk be diversified away by investing in both Total Energy and High Arctic 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 Total Energy and High Arctic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Energy Services and High Arctic Energy, you can compare the effects of market volatilities on Total Energy and High Arctic 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 Total Energy with a short position of High Arctic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Energy and High Arctic.
Diversification Opportunities for Total Energy and High Arctic
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Total and High is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Total Energy Services and High Arctic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Arctic Energy and Total 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 Total Energy Services are associated (or correlated) with High Arctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Arctic Energy has no effect on the direction of Total Energy i.e., Total Energy and High Arctic go up and down completely randomly.
Pair Corralation between Total Energy and High Arctic
Assuming the 90 days horizon Total Energy is expected to generate 34.71 times less return on investment than High Arctic. But when comparing it to its historical volatility, Total Energy Services is 14.71 times less risky than High Arctic. It trades about 0.04 of its potential returns per unit of risk. High Arctic Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 241.00 in High Arctic Energy on September 3, 2024 and sell it today you would lose (160.00) from holding High Arctic Energy or give up 66.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.76% |
| Values | Daily Returns |
Total Energy Services vs. High Arctic Energy
Performance |
| Timeline |
| Total Energy Services |
| High Arctic Energy |
Total Energy and High Arctic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Energy and High Arctic
The main advantage of trading using opposite Total Energy and High Arctic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Energy position performs unexpectedly, High Arctic 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 High Arctic will offset losses from the drop in High Arctic's long position.| Total Energy vs. Source Energy Services | Total Energy vs. Trican Well Service | Total Energy vs. STEP Energy Services | Total Energy vs. Koil Energy Solutions |
| High Arctic vs. Seadrill Limited | High Arctic vs. Noble plc | High Arctic vs. Borr Drilling | High Arctic vs. SCOR PK |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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