Correlation Between Energy Focu and Soho House

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

By analyzing existing cross correlation between Energy Focu and Soho House Co, you can compare the effects of market volatilities on Energy Focu and Soho House 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 Soho House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Focu and Soho House.

Diversification Opportunities for Energy Focu and Soho House

-0.4

Correlation Coefficient

Energy Focu  Soho House

Very good diversification

The 3 months correlation between Energy and Soho is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Energy Focu and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House 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 Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of Energy Focu i.e., Energy Focu and Soho House go up and down completely randomly.

Pair Corralation between Energy Focu and Soho House

Given the investment horizon of 90 days Energy Focu is expected to generate 1.33 times more return on investment than Soho House. However, Energy Focu is 1.33 times more volatile than Soho House Co. It trades about 0.29 of its potential returns per unit of risk. Soho House Co is currently generating about 0.02 per unit of risk. If you would invest  123.00  in Energy Focu on October 23, 2024 and sell it today you would earn a total of  17.00  from holding Energy Focu or generate 13.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Energy Focu  vs.  Soho House Co

Energy Focu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Focu has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Energy Focu is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Soho House

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Soho House Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Soho House displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Focu and Soho House

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

The idea behind Energy Focu and Soho House 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..