Correlation Between Energy Fund and Energy Service

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

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

Diversification Opportunities for Energy Fund and Energy Service

0.0

Correlation Coefficient

Energy Fund  Energy Service

Pay attention - limited upside

The 3 months correlation between ENERGY and Energy is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Energy Service Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Service Portfolio and Energy Fund 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 Energy Fund Class are associated (or correlated) with Energy Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Service Portfolio has no effect on the direction of Energy Fund i.e., Energy Fund and Energy Service go up and down completely randomly.

Pair Corralation between Energy Fund and Energy Service

If you would invest (100.00) in Energy Service Portfolio on November 29, 2024 and sell it today you would earn a total of  100.00  from holding Energy Service Portfolio or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Energy Fund Class  vs.  Energy Service Portfolio

Energy Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Energy Service Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Service Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Energy Service is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Fund and Energy Service

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

The idea behind Energy Fund Class and Energy Service Portfolio 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.