Correlation Between Stock Exchange and Super Energy

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

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

Diversification Opportunities for Stock Exchange and Super Energy

0.26

Correlation Coefficient

Stock Exchange  Super Energy

Modest diversification

The 3 months correlation between Stock and Super is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Stock Exchange Of and Super Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Energy and Stock Exchange 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 Stock Exchange Of are associated (or correlated) with Super Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Energy has no effect on the direction of Stock Exchange i.e., Stock Exchange and Super Energy go up and down completely randomly.

Pair Corralation between Stock Exchange and Super Energy

Assuming the 90 days trading horizon Stock Exchange Of is expected to generate 0.11 times more return on investment than Super Energy. However, Stock Exchange Of is 9.03 times less risky than Super Energy. It trades about -0.33 of its potential returns per unit of risk. Super Energy is currently generating about -0.13 per unit of risk. If you would invest  145,476  in Stock Exchange Of on December 3, 2024 and sell it today you would lose (25,104) from holding Stock Exchange Of or give up 17.26% of portfolio value over 90 days.

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

Stock Exchange Of  vs.  Super Energy

Pair Trading with Stock Exchange and Super Energy

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

The idea behind Stock Exchange Of and Super Energy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.