Correlation Between Cross Timbers and Genel Energy

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

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

Diversification Opportunities for Cross Timbers and Genel Energy

0.32

Correlation Coefficient

Cross Timbers  Genel Energy

Weak diversification

The 3 months correlation between Cross and Genel is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty and Genel Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genel Energy plc and Cross Timbers 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 Cross Timbers Royalty are associated (or correlated) with Genel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genel Energy plc has no effect on the direction of Cross Timbers i.e., Cross Timbers and Genel Energy go up and down completely randomly.

Pair Corralation between Cross Timbers and Genel Energy

Considering the 90-day investment horizon Cross Timbers Royalty is expected to generate 0.9 times more return on investment than Genel Energy. However, Cross Timbers Royalty is 1.11 times less risky than Genel Energy. It trades about 0.16 of its potential returns per unit of risk. Genel Energy plc is currently generating about 0.04 per unit of risk. If you would invest  929.00  in Cross Timbers Royalty on December 18, 2024 and sell it today you would earn a total of  163.00  from holding Cross Timbers Royalty or generate 17.55% return on investment over 90 days.

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

Cross Timbers Royalty  vs.  Genel Energy plc

Cross Timbers Royalty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cross Timbers Royalty are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cross Timbers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Genel Energy plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genel Energy plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Genel Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cross Timbers and Genel Energy

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

The idea behind Cross Timbers Royalty and Genel Energy plc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.