Correlation Between Crown Holdings and Crown Energy

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

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

Diversification Opportunities for Crown Holdings and Crown Energy

0.2

Correlation Coefficient

Crown Holdings  Crown Energy

Modest diversification

The 3 months correlation between Crown and Crown is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Crown Holdings and Crown Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Energy AB and Crown Holdings 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 Crown Holdings are associated (or correlated) with Crown Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Energy AB has no effect on the direction of Crown Holdings i.e., Crown Holdings and Crown Energy go up and down completely randomly.

Pair Corralation between Crown Holdings and Crown Energy

Assuming the 90 days horizon Crown Holdings is expected to generate 5.8 times less return on investment than Crown Energy. But when comparing it to its historical volatility, Crown Holdings is 9.76 times less risky than Crown Energy. It trades about 0.05 of its potential returns per unit of risk. Crown Energy AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7.60  in Crown Energy AB on October 7, 2024 and sell it today you would lose (4.95) from holding Crown Energy AB or give up 65.13% of portfolio value over 90 days.

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

Crown Holdings  vs.  Crown Energy AB

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Crown Energy AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Energy AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Crown Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crown Holdings and Crown Energy

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

The idea behind Crown Holdings and Crown Energy AB 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.