Correlation Between PHX Energy and IShares Fundamental

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

By analyzing existing cross correlation between PHX Energy Services and iShares Fundamental Hedged, you can compare the effects of market volatilities on PHX Energy and IShares Fundamental 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 PHX Energy with a short position of IShares Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHX Energy and IShares Fundamental.

Diversification Opportunities for PHX Energy and IShares Fundamental

0.54

Correlation Coefficient

PHX Energy  IShares Fundamental

Very weak diversification

The 3 months correlation between PHX and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental and PHX 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 PHX Energy Services are associated (or correlated) with IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of PHX Energy i.e., PHX Energy and IShares Fundamental go up and down completely randomly.

Pair Corralation between PHX Energy and IShares Fundamental

Assuming the 90 days trading horizon PHX Energy Services is expected to generate 2.8 times more return on investment than IShares Fundamental. However, PHX Energy is 2.8 times more volatile than iShares Fundamental Hedged. It trades about 0.06 of its potential returns per unit of risk. iShares Fundamental Hedged is currently generating about 0.13 per unit of risk. If you would invest  897.00  in PHX Energy Services on September 13, 2024 and sell it today you would earn a total of  50.00  from holding PHX Energy Services or generate 5.57% return on investment over 90 days.

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

PHX Energy Services  vs.  iShares Fundamental Hedged

PHX Energy Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Energy Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, PHX Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Fundamental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PHX Energy and IShares Fundamental

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

The idea behind PHX Energy Services and iShares Fundamental Hedged 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.