Correlation Between US Energy and Ring Energy
Can any of the company-specific risk be diversified away by investing in both US Energy and Ring 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 US Energy and Ring Energy 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 Ring Energy, you can compare the effects of market volatilities on US Energy and Ring 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 US Energy with a short position of Ring Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Energy and Ring Energy.
Diversification Opportunities for US Energy and Ring Energy
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between USEG and Ring is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp and Ring Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ring 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 Ring Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ring Energy has no effect on the direction of US Energy i.e., US Energy and Ring Energy go up and down completely randomly.
Pair Corralation between US Energy and Ring Energy
Given the investment horizon of 90 days US Energy Corp is expected to generate 1.03 times more return on investment than Ring Energy. However, US Energy is 1.03 times more volatile than Ring Energy. It trades about 0.0 of its potential returns per unit of risk. Ring Energy is currently generating about -0.01 per unit of risk. If you would invest 238.00 in US Energy Corp on August 27, 2024 and sell it today you would lose (52.00) from holding US Energy Corp or give up 21.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Energy Corp vs. Ring Energy
Performance |
| Timeline |
| US Energy Corp |
| Ring Energy |
US Energy and Ring Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Energy and Ring Energy
The main advantage of trading using opposite US Energy and Ring Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Energy position performs unexpectedly, Ring 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 Ring Energy will offset losses from the drop in Ring Energy'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 |
| Ring Energy vs. Vital Energy | Ring Energy vs. Permian Resources | Ring Energy vs. Magnolia Oil Gas | Ring Energy vs. SM Energy Co |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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