Correlation Between Sapiens International and Expand Energy

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

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

Diversification Opportunities for Sapiens International and Expand Energy

-0.76

Correlation Coefficient

Sapiens International  Expand Energy

Pay attention - limited upside

The 3 months correlation between Sapiens and Expand is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy and Sapiens International 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 Sapiens International are associated (or correlated) with Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Sapiens International i.e., Sapiens International and Expand Energy go up and down completely randomly.

Pair Corralation between Sapiens International and Expand Energy

Given the investment horizon of 90 days Sapiens International is expected to under-perform the Expand Energy. In addition to that, Sapiens International is 1.2 times more volatile than Expand Energy. It trades about -0.1 of its total potential returns per unit of risk. Expand Energy is currently generating about 0.08 per unit of volatility. If you would invest  7,451  in Expand Energy on September 21, 2024 and sell it today you would earn a total of  1,394  from holding Expand Energy or generate 18.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.07%
Values	Daily Returns

Sapiens International  vs.  Expand Energy

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Expand Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expand Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Expand Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sapiens International and Expand Energy

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

The idea behind Sapiens International and Expand 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.