Correlation Between Eternal Energy and G J

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

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

Diversification Opportunities for Eternal Energy and G J

-0.3

Correlation Coefficient

Eternal Energy  G J

Very good diversification

The 3 months correlation between Eternal and GJS is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Energy Public and G J Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G J Steel and Eternal 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 Eternal Energy Public are associated (or correlated) with G J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G J Steel has no effect on the direction of Eternal Energy i.e., Eternal Energy and G J go up and down completely randomly.

Pair Corralation between Eternal Energy and G J

Assuming the 90 days horizon Eternal Energy Public is expected to generate 2.33 times more return on investment than G J. However, Eternal Energy is 2.33 times more volatile than G J Steel. It trades about 0.25 of its potential returns per unit of risk. G J Steel is currently generating about -0.05 per unit of risk. If you would invest  17.00  in Eternal Energy Public on September 17, 2024 and sell it today you would earn a total of  41.00  from holding Eternal Energy Public or generate 241.18% return on investment over 90 days.

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

Eternal Energy Public  vs.  G J Steel

Eternal Energy Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

G J Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G J Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Eternal Energy and G J

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

The idea behind Eternal Energy Public and G J Steel 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.