Correlation Between Caspian Services and Valeura Energy

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

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

Diversification Opportunities for Caspian Services and Valeura Energy

0.68

Correlation Coefficient

Caspian Services  Valeura Energy

Poor diversification

The 3 months correlation between Caspian and Valeura is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Caspian Services and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy and Caspian Services 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 Caspian 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 Caspian Services i.e., Caspian Services and Valeura Energy go up and down completely randomly.

Pair Corralation between Caspian Services and Valeura Energy

Given the investment horizon of 90 days Caspian Services is expected to generate 9.63 times more return on investment than Valeura Energy. However, Caspian Services is 9.63 times more volatile than Valeura Energy. It trades about 0.05 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.07 per unit of risk. If you would invest  0.11  in Caspian Services on September 26, 2024 and sell it today you would earn a total of  0.29  from holding Caspian Services or generate 263.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Caspian Services  vs.  Valeura Energy

Caspian Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caspian Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Caspian Services showed solid returns over the last few months and may actually be approaching a breakup point.

Valeura Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 14 (%) 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 Caspian Services and Valeura Energy

The main advantage of trading using opposite Caspian Services and Valeura Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caspian Services 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 Caspian 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.