Correlation Between Western Energy and Pason Systems
Can any of the company-specific risk be diversified away by investing in both Western Energy and Pason Systems 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 Western Energy and Pason Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Energy Services and Pason Systems, you can compare the effects of market volatilities on Western Energy and Pason Systems 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 Western Energy with a short position of Pason Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Energy and Pason Systems.
Diversification Opportunities for Western Energy and Pason Systems
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Pason is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Western Energy Services and Pason Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pason Systems and Western 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 Western Energy Services are associated (or correlated) with Pason Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pason Systems has no effect on the direction of Western Energy i.e., Western Energy and Pason Systems go up and down completely randomly.
Pair Corralation between Western Energy and Pason Systems
Assuming the 90 days trading horizon Western Energy is expected to generate 2.51 times less return on investment than Pason Systems. In addition to that, Western Energy is 1.71 times more volatile than Pason Systems. It trades about 0.03 of its total potential returns per unit of risk. Pason Systems is currently generating about 0.12 per unit of volatility. If you would invest 1,347 in Pason Systems on September 1, 2024 and sell it today you would earn a total of 70.00 from holding Pason Systems or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Energy Services vs. Pason Systems
Performance |
| Timeline |
| Western Energy Services |
| Pason Systems |
Western Energy and Pason Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Energy and Pason Systems
The main advantage of trading using opposite Western Energy and Pason Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Energy position performs unexpectedly, Pason Systems 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 Pason Systems will offset losses from the drop in Pason Systems' long position.| Western Energy vs. Total Energy Services | Western Energy vs. PHX Energy Services | Western Energy vs. Calfrac Well Services |
| Pason Systems vs. Enerflex | Pason Systems vs. Mullen Group | Pason Systems vs. Secure Energy Services | Pason Systems vs. Ensign Energy Services |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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