Correlation Between Diversified Energy and Concurrent Technologies

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

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

Diversification Opportunities for Diversified Energy and Concurrent Technologies

0.76

Correlation Coefficient

Diversified Energy  Concurrent Technologies

Poor diversification

The 3 months correlation between Diversified and Concurrent is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and Concurrent Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concurrent Technologies and Diversified Energy 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 Diversified Energy are associated (or correlated) with Concurrent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concurrent Technologies has no effect on the direction of Diversified Energy i.e., Diversified Energy and Concurrent Technologies go up and down completely randomly.

Pair Corralation between Diversified Energy and Concurrent Technologies

Assuming the 90 days trading horizon Diversified Energy is expected to generate 0.83 times more return on investment than Concurrent Technologies. However, Diversified Energy is 1.2 times less risky than Concurrent Technologies. It trades about 0.24 of its potential returns per unit of risk. Concurrent Technologies Plc is currently generating about 0.18 per unit of risk. If you would invest  91,579  in Diversified Energy on October 22, 2024 and sell it today you would earn a total of  42,721  from holding Diversified Energy or generate 46.65% return on investment over 90 days.

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

Diversified Energy  vs.  Concurrent Technologies Plc

Diversified Energy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Energy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Diversified Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Concurrent Technologies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Concurrent Technologies Plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Concurrent Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diversified Energy and Concurrent Technologies

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

The idea behind Diversified Energy and Concurrent Technologies 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.