Correlation Between Energy Focu and Patrick Industries

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

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

Diversification Opportunities for Energy Focu and Patrick Industries

-0.09

Correlation Coefficient

Energy Focu  Patrick Industries

Good diversification

The 3 months correlation between Energy and Patrick is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Energy Focu and Patrick Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patrick Industries and Energy Focu 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 Focu are associated (or correlated) with Patrick Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patrick Industries has no effect on the direction of Energy Focu i.e., Energy Focu and Patrick Industries go up and down completely randomly.

Pair Corralation between Energy Focu and Patrick Industries

Given the investment horizon of 90 days Energy Focu is expected to generate 8.57 times more return on investment than Patrick Industries. However, Energy Focu is 8.57 times more volatile than Patrick Industries. It trades about 0.09 of its potential returns per unit of risk. Patrick Industries is currently generating about 0.03 per unit of risk. If you would invest  121.00  in Energy Focu on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Energy Focu or generate 52.89% return on investment over 90 days.

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

Energy Focu  vs.  Patrick Industries

Energy Focu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Energy Focu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Patrick Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patrick Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Patrick Industries is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Energy Focu and Patrick Industries

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

The idea behind Energy Focu and Patrick Industries 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.