Correlation Between Export Development and Natural Gas

Can any of the company-specific risk be diversified away by investing in both Export Development and Natural Gas 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 Export Development and Natural Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Export Development Bank and Natural Gas Mining, you can compare the effects of market volatilities on Export Development and Natural Gas 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 Export Development with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Export Development and Natural Gas.

Diversification Opportunities for Export Development and Natural Gas

0.17

Correlation Coefficient

Export Development  Natural Gas

Average diversification

The 3 months correlation between Export and Natural is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Export Development Bank and Natural Gas Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Mining and Export Development 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 Export Development Bank are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Mining has no effect on the direction of Export Development i.e., Export Development and Natural Gas go up and down completely randomly.

Pair Corralation between Export Development and Natural Gas

Assuming the 90 days trading horizon Export Development Bank is expected to generate 0.63 times more return on investment than Natural Gas. However, Export Development Bank is 1.58 times less risky than Natural Gas. It trades about 0.05 of its potential returns per unit of risk. Natural Gas Mining is currently generating about -0.06 per unit of risk. If you would invest  1,660  in Export Development Bank on September 29, 2024 and sell it today you would earn a total of  88.00  from holding Export Development Bank or generate 5.3% return on investment over 90 days.

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

Export Development Bank  vs.  Natural Gas Mining

Export Development Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Export Development Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Export Development may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Natural Gas Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Gas Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Export Development and Natural Gas

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

The idea behind Export Development Bank and Natural Gas Mining 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 Stocks Directory module to find actively traded stocks across global markets.