Correlation Between US Energy and Houston American
Can any of the company-specific risk be diversified away by investing in both US Energy and Houston American 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 US Energy and Houston American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Energy Corp and Houston American Energy, you can compare the effects of market volatilities on US Energy and Houston American 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 US Energy with a short position of Houston American. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Energy and Houston American.
Diversification Opportunities for US Energy and Houston American
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between USEG and Houston is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp and Houston American Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houston American Energy and US 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 US Energy Corp are associated (or correlated) with Houston American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Houston American Energy has no effect on the direction of US Energy i.e., US Energy and Houston American go up and down completely randomly.
Pair Corralation between US Energy and Houston American
Given the investment horizon of 90 days US Energy Corp is expected to generate 1.31 times more return on investment than Houston American. However, US Energy is 1.31 times more volatile than Houston American Energy. It trades about 0.15 of its potential returns per unit of risk. Houston American Energy is currently generating about 0.08 per unit of risk. If you would invest 165.00 in US Energy Corp on November 4, 2024 and sell it today you would earn a total of 54.00 from holding US Energy Corp or generate 32.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
US Energy Corp vs. Houston American Energy
Performance |
Timeline |
US Energy Corp |
Houston American Energy |
US Energy and Houston American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with US Energy and Houston American
The main advantage of trading using opposite US Energy and Houston American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Energy position performs unexpectedly, Houston American 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 Houston American will offset losses from the drop in Houston American's long position.US Energy vs. PEDEVCO Corp | US Energy vs. Houston American Energy | US Energy vs. PHX Minerals | US Energy vs. Trio Petroleum Corp |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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