Correlation Between Energy Resources and Medibank Private
Can any of the company-specific risk be diversified away by investing in both Energy Resources and Medibank Private 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 Resources and Medibank Private into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Resources and Medibank Private, you can compare the effects of market volatilities on Energy Resources and Medibank Private 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 Resources with a short position of Medibank Private. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and Medibank Private.
Diversification Opportunities for Energy Resources and Medibank Private
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Energy and Medibank is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Medibank Private in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medibank Private and Energy Resources 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 Resources are associated (or correlated) with Medibank Private. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medibank Private has no effect on the direction of Energy Resources i.e., Energy Resources and Medibank Private go up and down completely randomly.
Pair Corralation between Energy Resources and Medibank Private
Assuming the 90 days trading horizon Energy Resources is expected to generate 39.81 times more return on investment than Medibank Private. However, Energy Resources is 39.81 times more volatile than Medibank Private. It trades about 0.2 of its potential returns per unit of risk. Medibank Private is currently generating about 0.08 per unit of risk. If you would invest 0.20 in Energy Resources on September 25, 2024 and sell it today you would earn a total of 0.10 from holding Energy Resources or generate 50.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Energy Resources vs. Medibank Private
Performance |
Timeline |
Energy Resources |
Medibank Private |
Energy Resources and Medibank Private Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Energy Resources and Medibank Private
The main advantage of trading using opposite Energy Resources and Medibank Private positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources position performs unexpectedly, Medibank Private 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 Medibank Private will offset losses from the drop in Medibank Private's long position.Energy Resources vs. Australian Unity Office | Energy Resources vs. Autosports Group | Energy Resources vs. Step One Clothing | Energy Resources vs. Insignia Financial |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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