Correlation Between Energy Services and Russell 2000

Can any of the company-specific risk be diversified away by investing in both Energy Services and Russell 2000 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 Services and Russell 2000 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy Services Fund and Russell 2000 15x, you can compare the effects of market volatilities on Energy Services and Russell 2000 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 Services with a short position of Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Russell 2000.

Diversification Opportunities for Energy Services and Russell 2000

0.68

Correlation Coefficient

Energy Services  Russell 2000

Poor diversification

The 3 months correlation between Energy and Russell is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Russell 2000 15x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 15x and Energy Services 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 Services Fund are associated (or correlated) with Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 15x has no effect on the direction of Energy Services i.e., Energy Services and Russell 2000 go up and down completely randomly.

Pair Corralation between Energy Services and Russell 2000

Assuming the 90 days horizon Energy Services is expected to generate 45.23 times less return on investment than Russell 2000. But when comparing it to its historical volatility, Energy Services Fund is 1.04 times less risky than Russell 2000. It trades about 0.0 of its potential returns per unit of risk. Russell 2000 15x is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,726  in Russell 2000 15x on October 8, 2024 and sell it today you would earn a total of  1,044  from holding Russell 2000 15x or generate 22.09% return on investment over 90 days.

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

Energy Services Fund  vs.  Russell 2000 15x

Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Russell 2000 15x

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Russell 2000 15x are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Russell 2000 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 Services and Russell 2000

The main advantage of trading using opposite Energy Services and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.

The idea behind Energy Services Fund and Russell 2000 15x 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.