Correlation Between Eternal Energy and Power Line

Can any of the company-specific risk be diversified away by investing in both Eternal Energy and Power Line 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 Power Line 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 Power Line Engineering, you can compare the effects of market volatilities on Eternal Energy and Power Line 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 Power Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Energy and Power Line.

Diversification Opportunities for Eternal Energy and Power Line

0.58

Correlation Coefficient

Eternal Energy  Power Line

Very weak diversification

The 3 months correlation between Eternal and Power is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Energy Public and Power Line Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Line Engineering 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 Power Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Line Engineering has no effect on the direction of Eternal Energy i.e., Eternal Energy and Power Line go up and down completely randomly.

Pair Corralation between Eternal Energy and Power Line

Assuming the 90 days horizon Eternal Energy Public is expected to generate 1.46 times more return on investment than Power Line. However, Eternal Energy is 1.46 times more volatile than Power Line Engineering. It trades about -0.07 of its potential returns per unit of risk. Power Line Engineering is currently generating about -0.21 per unit of risk. If you would invest  55.00  in Eternal Energy Public on December 27, 2024 and sell it today you would lose (14.00) from holding Eternal Energy Public or give up 25.45% of portfolio value over 90 days.

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

Eternal Energy Public  vs.  Power Line Engineering

Eternal Energy Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eternal Energy Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Power Line Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Line Engineering 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 technical and fundamental indicators 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.

Pair Trading with Eternal Energy and Power Line

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

The idea behind Eternal Energy Public and Power Line Engineering 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.