Correlation Between Energy Basic and Cohen Steers

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

By analyzing existing cross correlation between Energy Basic Materials and Cohen Steers Low, you can compare the effects of market volatilities on Energy Basic and Cohen Steers 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 Basic with a short position of Cohen Steers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Cohen Steers.

Diversification Opportunities for Energy Basic and Cohen Steers

0.61

Correlation Coefficient

Energy Basic  Cohen Steers

Poor diversification

The 3 months correlation between Energy and Cohen is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Cohen Steers Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Steers Low and Energy Basic 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 Basic Materials are associated (or correlated) with Cohen Steers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Steers Low has no effect on the direction of Energy Basic i.e., Energy Basic and Cohen Steers go up and down completely randomly.

Pair Corralation between Energy Basic and Cohen Steers

Assuming the 90 days horizon Energy Basic is expected to generate 4.8 times less return on investment than Cohen Steers. In addition to that, Energy Basic is 8.83 times more volatile than Cohen Steers Low. It trades about 0.01 of its total potential returns per unit of risk. Cohen Steers Low is currently generating about 0.32 per unit of volatility. If you would invest  849.00  in Cohen Steers Low on September 12, 2024 and sell it today you would earn a total of  101.00  from holding Cohen Steers Low or generate 11.9% return on investment over 90 days.

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

Energy Basic Materials  vs.  Cohen Steers Low

Energy Basic Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Basic Materials are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Energy Basic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cohen Steers Low

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Steers Low are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Cohen Steers 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 Basic and Cohen Steers

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

The idea behind Energy Basic Materials and Cohen Steers Low 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.