Correlation Between Energy and Chemours

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

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

Diversification Opportunities for Energy and Chemours

0.45

Correlation Coefficient

Energy  Chemours

Very weak diversification

The 3 months correlation between Energy and Chemours is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Environmental and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours and 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 Energy and Environmental are associated (or correlated) with Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Energy i.e., Energy and Chemours go up and down completely randomly.

Pair Corralation between Energy and Chemours

Given the investment horizon of 90 days Energy and Environmental is expected to under-perform the Chemours. In addition to that, Energy is 1.78 times more volatile than Chemours Co. It trades about -0.05 of its total potential returns per unit of risk. Chemours Co is currently generating about 0.19 per unit of volatility. If you would invest  1,754  in Chemours Co on October 24, 2024 and sell it today you would earn a total of  186.00  from holding Chemours Co or generate 10.6% return on investment over 90 days.

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

Energy and Environmental  vs.  Chemours Co

Energy and Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy and Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chemours

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chemours Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Chemours may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Energy and Chemours

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

The idea behind Energy and Environmental and Chemours Co 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.