Correlation Between Sabien Technology and Diversified Energy

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

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

Diversification Opportunities for Sabien Technology and Diversified Energy

-0.2

Correlation Coefficient

Sabien Technology  Diversified Energy

Good diversification

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

Pair Corralation between Sabien Technology and Diversified Energy

Assuming the 90 days trading horizon Sabien Technology is expected to generate 1.16 times less return on investment than Diversified Energy. In addition to that, Sabien Technology is 1.6 times more volatile than Diversified Energy. It trades about 0.15 of its total potential returns per unit of risk. Diversified Energy is currently generating about 0.27 per unit of volatility. If you would invest  102,177  in Diversified Energy on October 7, 2024 and sell it today you would earn a total of  37,123  from holding Diversified Energy or generate 36.33% return on investment over 90 days.

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

Sabien Technology Group  vs.  Diversified Energy

Sabien Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabien Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Sabien Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Diversified Energy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Energy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Diversified Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabien Technology and Diversified Energy

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

The idea behind Sabien Technology Group and Diversified 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.