Correlation Between PHX Energy and IShares Canadian

Can any of the company-specific risk be diversified away by investing in both PHX Energy and IShares Canadian 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 Canadian 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 Canadian HYBrid, you can compare the effects of market volatilities on PHX Energy and IShares Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHX Energy and IShares Canadian.

Diversification Opportunities for PHX Energy and IShares Canadian

-0.73

Correlation Coefficient

PHX Energy  IShares Canadian

Pay attention - limited upside

The 3 months correlation between PHX and IShares is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian HYBrid has no effect on the direction of PHX Energy i.e., PHX Energy and IShares Canadian go up and down completely randomly.

Pair Corralation between PHX Energy and IShares Canadian

Assuming the 90 days trading horizon PHX Energy is expected to generate 2.06 times less return on investment than IShares Canadian. In addition to that, PHX Energy is 5.05 times more volatile than iShares Canadian HYBrid. It trades about 0.01 of its total potential returns per unit of risk. iShares Canadian HYBrid is currently generating about 0.09 per unit of volatility. If you would invest  1,960  in iShares Canadian HYBrid on December 28, 2024 and sell it today you would earn a total of  29.00  from holding iShares Canadian HYBrid or generate 1.48% return on investment over 90 days.

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

PHX Energy Services  vs.  iShares Canadian HYBrid

PHX Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PHX Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares Canadian HYBrid

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PHX Energy and IShares Canadian

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

The idea behind PHX Energy Services and iShares Canadian HYBrid 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.