Correlation Between Archer and Cathedral Energy

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

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

Diversification Opportunities for Archer and Cathedral Energy

-0.21

Correlation Coefficient

Archer  Cathedral Energy

Very good diversification

The 3 months correlation between Archer and Cathedral is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Archer Limited and Cathedral Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathedral Energy Services and Archer 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 Archer Limited are associated (or correlated) with Cathedral Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathedral Energy Services has no effect on the direction of Archer i.e., Archer and Cathedral Energy go up and down completely randomly.

Pair Corralation between Archer and Cathedral Energy

Assuming the 90 days horizon Archer Limited is expected to under-perform the Cathedral Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Archer Limited is 2.63 times less risky than Cathedral Energy. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Cathedral Energy Services is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  460.00  in Cathedral Energy Services on September 1, 2024 and sell it today you would lose (7.00) from holding Cathedral Energy Services or give up 1.52% of portfolio value over 90 days.

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

Archer Limited  vs.  Cathedral Energy Services

Archer Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archer Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Archer is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Cathedral Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathedral Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cathedral Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Archer and Cathedral Energy

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

The idea behind Archer Limited and Cathedral Energy Services 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.