Correlation Between CUSTODIAN INVESTMENT and INTERNATIONAL ENERGY

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

By analyzing existing cross correlation between CUSTODIAN INVESTMENT PLC and INTERNATIONAL ENERGY INSURANCE, you can compare the effects of market volatilities on CUSTODIAN INVESTMENT and INTERNATIONAL 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 CUSTODIAN INVESTMENT with a short position of INTERNATIONAL ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of CUSTODIAN INVESTMENT and INTERNATIONAL ENERGY.

Diversification Opportunities for CUSTODIAN INVESTMENT and INTERNATIONAL ENERGY

0.86

Correlation Coefficient

CUSTODIAN INVESTMENT  INTERNATIONAL ENERGY

Very poor diversification

The 3 months correlation between CUSTODIAN and INTERNATIONAL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CUSTODIAN INVESTMENT PLC and INTERNATIONAL ENERGY INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL ENERGY and CUSTODIAN INVESTMENT 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 CUSTODIAN INVESTMENT PLC are associated (or correlated) with INTERNATIONAL ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL ENERGY has no effect on the direction of CUSTODIAN INVESTMENT i.e., CUSTODIAN INVESTMENT and INTERNATIONAL ENERGY go up and down completely randomly.

Pair Corralation between CUSTODIAN INVESTMENT and INTERNATIONAL ENERGY

Assuming the 90 days trading horizon CUSTODIAN INVESTMENT is expected to generate 1.11 times less return on investment than INTERNATIONAL ENERGY. But when comparing it to its historical volatility, CUSTODIAN INVESTMENT PLC is 2.04 times less risky than INTERNATIONAL ENERGY. It trades about 0.26 of its potential returns per unit of risk. INTERNATIONAL ENERGY INSURANCE is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  136.00  in INTERNATIONAL ENERGY INSURANCE on December 4, 2024 and sell it today you would earn a total of  65.00  from holding INTERNATIONAL ENERGY INSURANCE or generate 47.79% return on investment over 90 days.

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

CUSTODIAN INVESTMENT PLC  vs.  INTERNATIONAL ENERGY INSURANCE

CUSTODIAN INVESTMENT PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CUSTODIAN INVESTMENT PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, CUSTODIAN INVESTMENT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

INTERNATIONAL ENERGY

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL ENERGY INSURANCE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, INTERNATIONAL ENERGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CUSTODIAN INVESTMENT and INTERNATIONAL ENERGY

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

The idea behind CUSTODIAN INVESTMENT PLC and INTERNATIONAL ENERGY INSURANCE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.