Correlation Between Energy Revenue and Next Generation

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

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

Diversification Opportunities for Energy Revenue and Next Generation

0.52

Correlation Coefficient

Energy Revenue  Next Generation

Very weak diversification

The 3 months correlation between Energy and Next is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Energy Revenue Amer and Next Generation Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Generation Mana and Energy Revenue 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 Revenue Amer are associated (or correlated) with Next Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Generation Mana has no effect on the direction of Energy Revenue i.e., Energy Revenue and Next Generation go up and down completely randomly.

Pair Corralation between Energy Revenue and Next Generation

Given the investment horizon of 90 days Energy Revenue Amer is expected to generate 1.17 times more return on investment than Next Generation. However, Energy Revenue is 1.17 times more volatile than Next Generation Management. It trades about 0.14 of its potential returns per unit of risk. Next Generation Management is currently generating about 0.1 per unit of risk. If you would invest  0.85  in Energy Revenue Amer on September 13, 2024 and sell it today you would earn a total of  2.15  from holding Energy Revenue Amer or generate 252.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.77%
Values	Daily Returns

Energy Revenue Amer  vs.  Next Generation Management

Energy Revenue Amer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Revenue Amer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Energy Revenue displayed solid returns over the last few months and may actually be approaching a breakup point.

Next Generation Mana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Next Generation Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Next Generation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Revenue and Next Generation

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

The idea behind Energy Revenue Amer and Next Generation Management 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.