Correlation Between Supernova Energy and Eco Oil

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

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

Diversification Opportunities for Supernova Energy and Eco Oil

-0.77

Correlation Coefficient

Supernova Energy  Eco Oil

Pay attention - limited upside

The 3 months correlation between Supernova and Eco is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Supernova Energy and Eco Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Oil Gas and Supernova Energy 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 Supernova Energy are associated (or correlated) with Eco Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Oil Gas has no effect on the direction of Supernova Energy i.e., Supernova Energy and Eco Oil go up and down completely randomly.

Pair Corralation between Supernova Energy and Eco Oil

Given the investment horizon of 90 days Supernova Energy is expected to generate 0.87 times more return on investment than Eco Oil. However, Supernova Energy is 1.15 times less risky than Eco Oil. It trades about 0.13 of its potential returns per unit of risk. Eco Oil Gas is currently generating about 0.01 per unit of risk. If you would invest  0.02  in Supernova Energy on September 17, 2024 and sell it today you would earn a total of  0.01  from holding Supernova Energy or generate 50.0% return on investment over 90 days.

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

Supernova Energy  vs.  Eco Oil Gas

Supernova Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Supernova Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Supernova Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Eco Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eco Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Supernova Energy and Eco Oil

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

The idea behind Supernova Energy and Eco Oil Gas 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.