Correlation Between Energy Revenue and Sack Lunch

Can any of the company-specific risk be diversified away by investing in both Energy Revenue and Sack Lunch 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 Sack Lunch 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 Sack Lunch Productions, you can compare the effects of market volatilities on Energy Revenue and Sack Lunch 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 Sack Lunch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Revenue and Sack Lunch.

Diversification Opportunities for Energy Revenue and Sack Lunch

-0.2

Correlation Coefficient

Energy Revenue  Sack Lunch

Good diversification

The 3 months correlation between Energy and Sack is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Energy Revenue Amer and Sack Lunch Productions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sack Lunch Productions 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 Sack Lunch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sack Lunch Productions has no effect on the direction of Energy Revenue i.e., Energy Revenue and Sack Lunch go up and down completely randomly.

Pair Corralation between Energy Revenue and Sack Lunch

Given the investment horizon of 90 days Energy Revenue Amer is expected to generate 2.61 times more return on investment than Sack Lunch. However, Energy Revenue is 2.61 times more volatile than Sack Lunch Productions. It trades about 0.24 of its potential returns per unit of risk. Sack Lunch Productions is currently generating about -0.05 per unit of risk. If you would invest  4.00  in Energy Revenue Amer on December 4, 2024 and sell it today you would earn a total of  4.88  from holding Energy Revenue Amer or generate 122.0% return on investment over 90 days.

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

Energy Revenue Amer  vs.  Sack Lunch Productions

Energy Revenue Amer

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Revenue Amer are ranked lower than 15 (%) 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.

Sack Lunch Productions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sack Lunch Productions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Sack Lunch disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Revenue and Sack Lunch

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

The idea behind Energy Revenue Amer and Sack Lunch Productions 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.