Correlation Between Energy Absolute and Bound

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

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

Diversification Opportunities for Energy Absolute and Bound

0.89

Correlation Coefficient

Energy Absolute  Bound

Very poor diversification

The 3 months correlation between Energy and Bound is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Energy Absolute Public and Bound and Beyond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bound and Beyond and Energy Absolute 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 Energy Absolute Public are associated (or correlated) with Bound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bound and Beyond has no effect on the direction of Energy Absolute i.e., Energy Absolute and Bound go up and down completely randomly.

Pair Corralation between Energy Absolute and Bound

Assuming the 90 days horizon Energy Absolute Public is expected to under-perform the Bound. In addition to that, Energy Absolute is 2.59 times more volatile than Bound and Beyond. It trades about -0.2 of its total potential returns per unit of risk. Bound and Beyond is currently generating about -0.17 per unit of volatility. If you would invest  850.00  in Bound and Beyond on December 30, 2024 and sell it today you would lose (150.00) from holding Bound and Beyond or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Energy Absolute Public  vs.  Bound and Beyond

Energy Absolute Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Absolute Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bound and Beyond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bound and Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Energy Absolute and Bound

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

The idea behind Energy Absolute Public and Bound and Beyond 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.