Correlation Between Valeura Energy and Southern Energy
Can any of the company-specific risk be diversified away by investing in both Valeura Energy and Southern 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 Valeura Energy and Southern Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valeura Energy and Southern Energy Corp, you can compare the effects of market volatilities on Valeura Energy and Southern 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 Valeura Energy with a short position of Southern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valeura Energy and Southern Energy.
Diversification Opportunities for Valeura Energy and Southern Energy
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Valeura and Southern is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Southern Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Energy Corp and Valeura 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 Valeura Energy are associated (or correlated) with Southern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Energy Corp has no effect on the direction of Valeura Energy i.e., Valeura Energy and Southern Energy go up and down completely randomly.
Pair Corralation between Valeura Energy and Southern Energy
Assuming the 90 days trading horizon Valeura Energy is expected to generate 1.07 times more return on investment than Southern Energy. However, Valeura Energy is 1.07 times more volatile than Southern Energy Corp. It trades about 0.08 of its potential returns per unit of risk. Southern Energy Corp is currently generating about -0.09 per unit of risk. If you would invest 171.00 in Valeura Energy on September 1, 2024 and sell it today you would earn a total of 451.00 from holding Valeura Energy or generate 263.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valeura Energy vs. Southern Energy Corp
Performance |
| Timeline |
| Valeura Energy |
| Southern Energy Corp |
Valeura Energy and Southern Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valeura Energy and Southern Energy
The main advantage of trading using opposite Valeura Energy and Southern Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valeura Energy position performs unexpectedly, Southern 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 Southern Energy will offset losses from the drop in Southern Energy's long position.The idea behind Valeura Energy and Southern Energy Corp 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.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 CEOs Directory module to screen CEOs from public companies around the world.
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