Correlation Between Energy Service and Energy Fund

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

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

Diversification Opportunities for Energy Service and Energy Fund

0.0

Correlation Coefficient

Energy Service  Energy Fund

Pay attention - limited upside

The 3 months correlation between Energy and Energy is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Energy Service Portfolio and Energy Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Investor and Energy Service 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 Service Portfolio are associated (or correlated) with Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Investor has no effect on the direction of Energy Service i.e., Energy Service and Energy Fund go up and down completely randomly.

Pair Corralation between Energy Service and Energy Fund

If you would invest  26,299  in Energy Fund Investor on August 31, 2024 and sell it today you would earn a total of  1,599  from holding Energy Fund Investor or generate 6.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Energy Service Portfolio  vs.  Energy Fund Investor

Energy Service Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Service Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Energy Service is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energy Fund Investor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fund Investor are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Energy Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Energy Service and Energy Fund

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

The idea behind Energy Service Portfolio and Energy Fund Investor 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.