Correlation Between ETC On and Ithaca Energy

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

By analyzing existing cross correlation between ETC on CMCI and Ithaca Energy PLC, you can compare the effects of market volatilities on ETC On and Ithaca 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 ETC On with a short position of Ithaca Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETC On and Ithaca Energy.

Diversification Opportunities for ETC On and Ithaca Energy

0.13

Correlation Coefficient

ETC On  Ithaca Energy

Average diversification

The 3 months correlation between ETC and Ithaca is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ETC on CMCI and Ithaca Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ithaca Energy PLC and ETC On 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 ETC on CMCI are associated (or correlated) with Ithaca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ithaca Energy PLC has no effect on the direction of ETC On i.e., ETC On and Ithaca Energy go up and down completely randomly.

Pair Corralation between ETC On and Ithaca Energy

Assuming the 90 days trading horizon ETC On is expected to generate 16.58 times less return on investment than Ithaca Energy. But when comparing it to its historical volatility, ETC on CMCI is 3.21 times less risky than Ithaca Energy. It trades about 0.05 of its potential returns per unit of risk. Ithaca Energy PLC is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,900  in Ithaca Energy PLC on December 30, 2024 and sell it today you would earn a total of  5,460  from holding Ithaca Energy PLC or generate 50.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

ETC on CMCI  vs.  Ithaca Energy PLC

ETC on CMCI

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ETC on CMCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ETC On is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ithaca Energy PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ithaca Energy PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ithaca Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETC On and Ithaca Energy

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

The idea behind ETC on CMCI and Ithaca Energy PLC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.