Correlation Between Micro Leasing and Eternal Energy

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

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

Diversification Opportunities for Micro Leasing and Eternal Energy

-0.76

Correlation Coefficient

Micro Leasing  Eternal Energy

Pay attention - limited upside

The 3 months correlation between Micro and Eternal is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Micro Leasing Public and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy Public and Micro Leasing 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 Micro Leasing Public are associated (or correlated) with Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of Micro Leasing i.e., Micro Leasing and Eternal Energy go up and down completely randomly.

Pair Corralation between Micro Leasing and Eternal Energy

Assuming the 90 days trading horizon Micro Leasing Public is expected to under-perform the Eternal Energy. But the stock apears to be less risky and, when comparing its historical volatility, Micro Leasing Public is 3.53 times less risky than Eternal Energy. The stock trades about -0.27 of its potential returns per unit of risk. The Eternal Energy Public is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Eternal Energy Public on October 7, 2024 and sell it today you would earn a total of  50.00  from holding Eternal Energy Public or generate 312.5% return on investment over 90 days.

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

Micro Leasing Public  vs.  Eternal Energy Public

Micro Leasing Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micro Leasing Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Eternal Energy Public

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micro Leasing and Eternal Energy

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

The idea behind Micro Leasing Public and Eternal Energy Public 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.