Correlation Between Energy Services and Southland Holdings

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

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

Diversification Opportunities for Energy Services and Southland Holdings

-0.46

Correlation Coefficient

Energy Services  Southland Holdings

Very good diversification

The 3 months correlation between Energy and Southland is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland Holdings and Energy Services 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 Services are associated (or correlated) with Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Energy Services i.e., Energy Services and Southland Holdings go up and down completely randomly.

Pair Corralation between Energy Services and Southland Holdings

Given the investment horizon of 90 days Energy Services is expected to generate 1.15 times more return on investment than Southland Holdings. However, Energy Services is 1.15 times more volatile than Southland Holdings. It trades about 0.1 of its potential returns per unit of risk. Southland Holdings is currently generating about -0.03 per unit of risk. If you would invest  252.00  in Energy Services on September 23, 2024 and sell it today you would earn a total of  1,348  from holding Energy Services or generate 534.92% return on investment over 90 days.

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

Energy Services  vs.  Southland Holdings

Energy Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Energy Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Southland Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southland Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Southland Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Energy Services and Southland Holdings

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

The idea behind Energy Services and Southland Holdings 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.