Correlation Between 2S Metal and Eternal Energy

Can any of the company-specific risk be diversified away by investing in both 2S Metal and Eternal 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 2S Metal and Eternal Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2S Metal Public and Eternal Energy Public, you can compare the effects of market volatilities on 2S Metal and Eternal 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 2S Metal with a short position of Eternal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2S Metal and Eternal Energy.

Diversification Opportunities for 2S Metal and Eternal Energy

-0.75

Correlation Coefficient

2S Metal  Eternal Energy

Pay attention - limited upside

The 3 months correlation between 2S Metal and Eternal is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding 2S Metal Public and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy Public and 2S Metal 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 2S Metal Public are associated (or correlated) with Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of 2S Metal i.e., 2S Metal and Eternal Energy go up and down completely randomly.

Pair Corralation between 2S Metal and Eternal Energy

Assuming the 90 days horizon 2S Metal Public is expected to generate 0.3 times more return on investment than Eternal Energy. However, 2S Metal Public is 3.32 times less risky than Eternal Energy. It trades about -0.12 of its potential returns per unit of risk. Eternal Energy Public is currently generating about -0.15 per unit of risk. If you would invest  274.00  in 2S Metal Public on October 22, 2024 and sell it today you would lose (12.00) from holding 2S Metal Public or give up 4.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

2S Metal Public  vs.  Eternal Energy Public

2S Metal Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 2S Metal Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Eternal Energy Public

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 2S Metal and Eternal Energy

The main advantage of trading using opposite 2S Metal and Eternal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2S Metal position performs unexpectedly, Eternal 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 Eternal Energy will offset losses from the drop in Eternal Energy's long position.

The idea behind 2S Metal Public and Eternal Energy Public 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.