Correlation Between Charwood Energy and Exail Technologies

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

By analyzing existing cross correlation between Charwood Energy SA and Exail Technologies SA, you can compare the effects of market volatilities on Charwood Energy and Exail Technologies 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 Charwood Energy with a short position of Exail Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charwood Energy and Exail Technologies.

Diversification Opportunities for Charwood Energy and Exail Technologies

0.65

Correlation Coefficient

Charwood Energy  Exail Technologies

Poor diversification

The 3 months correlation between Charwood and Exail is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Charwood Energy SA and Exail Technologies SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exail Technologies and Charwood 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 Charwood Energy SA are associated (or correlated) with Exail Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exail Technologies has no effect on the direction of Charwood Energy i.e., Charwood Energy and Exail Technologies go up and down completely randomly.

Pair Corralation between Charwood Energy and Exail Technologies

Assuming the 90 days trading horizon Charwood Energy is expected to generate 1.59 times less return on investment than Exail Technologies. In addition to that, Charwood Energy is 2.09 times more volatile than Exail Technologies SA. It trades about 0.1 of its total potential returns per unit of risk. Exail Technologies SA is currently generating about 0.33 per unit of volatility. If you would invest  1,710  in Exail Technologies SA on December 22, 2024 and sell it today you would earn a total of  1,650  from holding Exail Technologies SA or generate 96.49% return on investment over 90 days.

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

Charwood Energy SA  vs.  Exail Technologies SA

Charwood Energy SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charwood Energy SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Charwood Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Exail Technologies

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Exail Technologies SA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Exail Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charwood Energy and Exail Technologies

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

The idea behind Charwood Energy SA and Exail Technologies SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.