Correlation Between Cathedral Energy and Valeura Energy

Can any of the company-specific risk be diversified away by investing in both Cathedral Energy and Valeura 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 Cathedral Energy and Valeura Energy 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 Valeura Energy, you can compare the effects of market volatilities on Cathedral Energy and Valeura 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 Cathedral Energy with a short position of Valeura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathedral Energy and Valeura Energy.

Diversification Opportunities for Cathedral Energy and Valeura Energy

0.52

Correlation Coefficient

Cathedral Energy  Valeura Energy

Very weak diversification

The 3 months correlation between Cathedral and Valeura is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cathedral Energy Services and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Cathedral Energy i.e., Cathedral Energy and Valeura Energy go up and down completely randomly.

Pair Corralation between Cathedral Energy and Valeura Energy

Assuming the 90 days horizon Cathedral Energy Services is expected to under-perform the Valeura Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Cathedral Energy Services is 2.37 times less risky than Valeura Energy. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Valeura Energy is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Valeura Energy on September 28, 2024 and sell it today you would earn a total of  73.00  from holding Valeura Energy or generate 18.86% return on investment over 90 days.

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

Cathedral Energy Services  vs.  Valeura Energy

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.

Valeura Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cathedral Energy and Valeura Energy

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

The idea behind Cathedral Energy Services and Valeura Energy 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.