Correlation Between Houston Natural and Susglobal Energy

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

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

Diversification Opportunities for Houston Natural and Susglobal Energy

-0.29

Correlation Coefficient

Houston Natural  Susglobal Energy

Very good diversification

The 3 months correlation between Houston and Susglobal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Houston Natural Resources and Susglobal Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Susglobal Energy Corp and Houston Natural 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 Houston Natural Resources are associated (or correlated) with Susglobal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Susglobal Energy Corp has no effect on the direction of Houston Natural i.e., Houston Natural and Susglobal Energy go up and down completely randomly.

Pair Corralation between Houston Natural and Susglobal Energy

Given the investment horizon of 90 days Houston Natural is expected to generate 46.55 times less return on investment than Susglobal Energy. But when comparing it to its historical volatility, Houston Natural Resources is 1.42 times less risky than Susglobal Energy. It trades about 0.0 of its potential returns per unit of risk. Susglobal Energy Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1.97  in Susglobal Energy Corp on December 30, 2024 and sell it today you would earn a total of  2.43  from holding Susglobal Energy Corp or generate 123.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	32.26%
Values	Daily Returns

Houston Natural Resources  vs.  Susglobal Energy Corp

Houston Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Houston Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Houston Natural is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Susglobal Energy Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Susglobal Energy Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Susglobal Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Houston Natural and Susglobal Energy

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

The idea behind Houston Natural Resources and Susglobal Energy Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.