Correlation Between XXL Energy and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both XXL Energy and Diversified 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 XXL Energy and Diversified Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XXL Energy Corp and Diversified Energy, you can compare the effects of market volatilities on XXL Energy and Diversified 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 XXL Energy with a short position of Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of XXL Energy and Diversified Energy.
Diversification Opportunities for XXL Energy and Diversified Energy
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between XXL and Diversified is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding XXL Energy Corp and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy and XXL 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 XXL Energy Corp are associated (or correlated) with Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of XXL Energy i.e., XXL Energy and Diversified Energy go up and down completely randomly.
Pair Corralation between XXL Energy and Diversified Energy
Assuming the 90 days horizon XXL Energy Corp is expected to under-perform the Diversified Energy. In addition to that, XXL Energy is 1.86 times more volatile than Diversified Energy. It trades about -0.03 of its total potential returns per unit of risk. Diversified Energy is currently generating about -0.01 per unit of volatility. If you would invest 2,238 in Diversified Energy on September 3, 2024 and sell it today you would lose (602.00) from holding Diversified Energy or give up 26.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.59% |
| Values | Daily Returns |
XXL Energy Corp vs. Diversified Energy
Performance |
| Timeline |
| XXL Energy Corp |
| Diversified Energy |
XXL Energy and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XXL Energy and Diversified Energy
The main advantage of trading using opposite XXL Energy and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL Energy position performs unexpectedly, Diversified 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| XXL Energy vs. PHX Minerals | XXL Energy vs. Mexco Energy | XXL Energy vs. Granite Ridge Resources | XXL Energy vs. PrimeEnergy |
| Diversified Energy vs. Granite Ridge Resources | Diversified Energy vs. North European Oil | Diversified Energy vs. CNX Resources Corp | Diversified Energy vs. GeoPark |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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