Correlation Between Desert Mountain and Sintana Energy

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

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

Diversification Opportunities for Desert Mountain and Sintana Energy

0.24

Correlation Coefficient

Desert Mountain  Sintana Energy

Modest diversification

The 3 months correlation between Desert and Sintana is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Desert Mountain Energy and Sintana Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sintana Energy and Desert Mountain 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 Desert Mountain Energy are associated (or correlated) with Sintana Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sintana Energy has no effect on the direction of Desert Mountain i.e., Desert Mountain and Sintana Energy go up and down completely randomly.

Pair Corralation between Desert Mountain and Sintana Energy

Assuming the 90 days horizon Desert Mountain Energy is expected to under-perform the Sintana Energy. In addition to that, Desert Mountain is 1.05 times more volatile than Sintana Energy. It trades about -0.04 of its total potential returns per unit of risk. Sintana Energy is currently generating about 0.09 per unit of volatility. If you would invest  11.00  in Sintana Energy on October 11, 2024 and sell it today you would earn a total of  62.00  from holding Sintana Energy or generate 563.64% return on investment over 90 days.

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

Desert Mountain Energy  vs.  Sintana Energy

Desert Mountain Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Desert Mountain Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Desert Mountain may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sintana Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sintana Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sintana Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Desert Mountain and Sintana Energy

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

The idea behind Desert Mountain Energy and Sintana 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.