Correlation Between Prime Energy and Energix Renewable

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

By analyzing existing cross correlation between Prime Energy PE and Energix Renewable Energies, you can compare the effects of market volatilities on Prime Energy and Energix Renewable 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 Prime Energy with a short position of Energix Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Energy and Energix Renewable.

Diversification Opportunities for Prime Energy and Energix Renewable

-0.42

Correlation Coefficient

Prime Energy  Energix Renewable

Very good diversification

The 3 months correlation between Prime and Energix is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Prime Energy PE and Energix Renewable Energies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energix Renewable and Prime 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 Prime Energy PE are associated (or correlated) with Energix Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energix Renewable has no effect on the direction of Prime Energy i.e., Prime Energy and Energix Renewable go up and down completely randomly.

Pair Corralation between Prime Energy and Energix Renewable

Assuming the 90 days trading horizon Prime Energy PE is expected to generate 2.0 times more return on investment than Energix Renewable. However, Prime Energy is 2.0 times more volatile than Energix Renewable Energies. It trades about 0.07 of its potential returns per unit of risk. Energix Renewable Energies is currently generating about -0.06 per unit of risk. If you would invest  63,470  in Prime Energy PE on September 4, 2024 and sell it today you would earn a total of  6,360  from holding Prime Energy PE or generate 10.02% return on investment over 90 days.

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

Prime Energy PE  vs.  Energix Renewable Energies

Prime Energy PE

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Energy PE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Energix Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energix Renewable Energies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Prime Energy and Energix Renewable

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

The idea behind Prime Energy PE and Energix Renewable Energies 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.