Correlation Between Simulated Environmen and Atlantic Energy

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

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

Diversification Opportunities for Simulated Environmen and Atlantic Energy

0.2

Correlation Coefficient

Simulated Environmen  Atlantic Energy

Modest diversification

The 3 months correlation between Simulated and Atlantic is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Simulated Environmen and Atlantic Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic Energy Solutions and Simulated Environmen 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 Simulated Environmen are associated (or correlated) with Atlantic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic Energy Solutions has no effect on the direction of Simulated Environmen i.e., Simulated Environmen and Atlantic Energy go up and down completely randomly.

Pair Corralation between Simulated Environmen and Atlantic Energy

Given the investment horizon of 90 days Simulated Environmen is expected to generate 75.78 times less return on investment than Atlantic Energy. But when comparing it to its historical volatility, Simulated Environmen is 4.91 times less risky than Atlantic Energy. It trades about 0.01 of its potential returns per unit of risk. Atlantic Energy Solutions is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.80  in Atlantic Energy Solutions on December 30, 2024 and sell it today you would earn a total of  0.80  from holding Atlantic Energy Solutions or generate 100.0% return on investment over 90 days.

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

Simulated Environmen  vs.  Atlantic Energy Solutions

Simulated Environmen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simulated Environmen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Simulated Environmen is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Atlantic Energy Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic Energy Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Atlantic Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simulated Environmen and Atlantic Energy

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

The idea behind Simulated Environmen and Atlantic Energy Solutions 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.