Correlation Between Ithaca Energy and SPDR SP

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

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

Diversification Opportunities for Ithaca Energy and SPDR SP

0.26

Correlation Coefficient

Ithaca Energy  SPDR SP

Modest diversification

The 3 months correlation between Ithaca and SPDR is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ithaca Energy PLC and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials and Ithaca Energy 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 Ithaca Energy PLC are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Materials has no effect on the direction of Ithaca Energy i.e., Ithaca Energy and SPDR SP go up and down completely randomly.

Pair Corralation between Ithaca Energy and SPDR SP

Assuming the 90 days trading horizon Ithaca Energy PLC is expected to generate 2.88 times more return on investment than SPDR SP. However, Ithaca Energy is 2.88 times more volatile than SPDR SP Materials. It trades about 0.24 of its potential returns per unit of risk. SPDR SP Materials is currently generating about 0.04 per unit of risk. If you would invest  10,900  in Ithaca Energy PLC on December 30, 2024 and sell it today you would earn a total of  5,460  from holding Ithaca Energy PLC or generate 50.09% return on investment over 90 days.

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

Ithaca Energy PLC  vs.  SPDR SP Materials

Ithaca Energy PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ithaca Energy PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ithaca Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Materials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ithaca Energy and SPDR SP

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

The idea behind Ithaca Energy PLC and SPDR SP Materials 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.