Correlation Between Cathedral Energy and Natera

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

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

Diversification Opportunities for Cathedral Energy and Natera

0.45

Correlation Coefficient

Cathedral Energy  Natera

Very weak diversification

The 3 months correlation between Cathedral and Natera is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cathedral Energy Services and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera Inc and Cathedral 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 Cathedral Energy Services are associated (or correlated) with Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of Cathedral Energy i.e., Cathedral Energy and Natera go up and down completely randomly.

Pair Corralation between Cathedral Energy and Natera

Assuming the 90 days horizon Cathedral Energy Services is expected to generate 0.63 times more return on investment than Natera. However, Cathedral Energy Services is 1.58 times less risky than Natera. It trades about -0.07 of its potential returns per unit of risk. Natera Inc is currently generating about -0.1 per unit of risk. If you would invest  452.00  in Cathedral Energy Services on September 27, 2024 and sell it today you would lose (10.00) from holding Cathedral Energy Services or give up 2.21% of portfolio value over 90 days.

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

Cathedral Energy Services  vs.  Natera Inc

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.

Natera Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cathedral Energy and Natera

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

The idea behind Cathedral Energy Services and Natera Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.