Correlation Between Geodrill and CES Energy

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

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

Diversification Opportunities for Geodrill and CES Energy

0.7

Correlation Coefficient

Geodrill  CES Energy

Poor diversification

The 3 months correlation between Geodrill and CES is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and CES Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CES Energy Solutions and Geodrill 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 Geodrill Limited are associated (or correlated) with CES Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CES Energy Solutions has no effect on the direction of Geodrill i.e., Geodrill and CES Energy go up and down completely randomly.

Pair Corralation between Geodrill and CES Energy

Assuming the 90 days trading horizon Geodrill Limited is expected to generate 1.51 times more return on investment than CES Energy. However, Geodrill is 1.51 times more volatile than CES Energy Solutions. It trades about 0.11 of its potential returns per unit of risk. CES Energy Solutions is currently generating about 0.12 per unit of risk. If you would invest  289.00  in Geodrill Limited on September 27, 2024 and sell it today you would earn a total of  12.00  from holding Geodrill Limited or generate 4.15% return on investment over 90 days.

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

Geodrill Limited  vs.  CES Energy Solutions

Geodrill Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill displayed solid returns over the last few months and may actually be approaching a breakup point.

CES Energy Solutions

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CES Energy Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CES Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and CES Energy

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

The idea behind Geodrill Limited and CES Energy Solutions 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.