Correlation Between Coles and Genesis Energy

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

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

Diversification Opportunities for Coles and Genesis Energy

0.11

Correlation Coefficient

Coles  Genesis Energy

Average diversification

The 3 months correlation between Coles and Genesis is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Genesis Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy and Coles 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 Coles Group are associated (or correlated) with Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy has no effect on the direction of Coles i.e., Coles and Genesis Energy go up and down completely randomly.

Pair Corralation between Coles and Genesis Energy

Assuming the 90 days trading horizon Coles Group is expected to generate 0.48 times more return on investment than Genesis Energy. However, Coles Group is 2.09 times less risky than Genesis Energy. It trades about 0.09 of its potential returns per unit of risk. Genesis Energy is currently generating about -0.02 per unit of risk. If you would invest  1,843  in Coles Group on December 22, 2024 and sell it today you would earn a total of  103.00  from holding Coles Group or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Coles Group  vs.  Genesis Energy

Coles Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coles Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Coles is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Genesis Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genesis Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Genesis Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coles and Genesis Energy

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

The idea behind Coles Group and Genesis 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.