Correlation Between First Asset and Harvest Energy

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

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

Diversification Opportunities for First Asset and Harvest Energy

0.57

Correlation Coefficient

First Asset  Harvest Energy

Very weak diversification

The 3 months correlation between First and Harvest is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Energy and Harvest Energy Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Energy Leaders and First Asset 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 First Asset Energy are associated (or correlated) with Harvest Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Energy Leaders has no effect on the direction of First Asset i.e., First Asset and Harvest Energy go up and down completely randomly.

Pair Corralation between First Asset and Harvest Energy

Assuming the 90 days trading horizon First Asset Energy is expected to generate 1.04 times more return on investment than Harvest Energy. However, First Asset is 1.04 times more volatile than Harvest Energy Leaders. It trades about 0.01 of its potential returns per unit of risk. Harvest Energy Leaders is currently generating about 0.01 per unit of risk. If you would invest  562.00  in First Asset Energy on September 13, 2024 and sell it today you would earn a total of  3.00  from holding First Asset Energy or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

First Asset Energy  vs.  Harvest Energy Leaders

First Asset Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Harvest Energy Leaders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harvest Energy Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Harvest Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Asset and Harvest Energy

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

The idea behind First Asset Energy and Harvest Energy Leaders 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.