Correlation Between Sure Tech and Prime Energy

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

By analyzing existing cross correlation between Sure Tech Investments LP and Prime Energy PE, you can compare the effects of market volatilities on Sure Tech and Prime 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 Sure Tech with a short position of Prime Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sure Tech and Prime Energy.

Diversification Opportunities for Sure Tech and Prime Energy

-0.31

Correlation Coefficient

Sure Tech  Prime Energy

Very good diversification

The 3 months correlation between Sure and Prime is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sure Tech Investments LP and Prime Energy PE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Energy PE and Sure Tech 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 Sure Tech Investments LP are associated (or correlated) with Prime Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Energy PE has no effect on the direction of Sure Tech i.e., Sure Tech and Prime Energy go up and down completely randomly.

Pair Corralation between Sure Tech and Prime Energy

Assuming the 90 days trading horizon Sure Tech is expected to generate 42.84 times less return on investment than Prime Energy. But when comparing it to its historical volatility, Sure Tech Investments LP is 1.34 times less risky than Prime Energy. It trades about 0.0 of its potential returns per unit of risk. Prime Energy PE is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  61,970  in Prime Energy PE on September 12, 2024 and sell it today you would earn a total of  9,070  from holding Prime Energy PE or generate 14.64% return on investment over 90 days.

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

Sure Tech Investments LP  vs.  Prime Energy PE

Sure Tech Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sure Tech Investments LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sure Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prime Energy PE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Energy PE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sure Tech and Prime Energy

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

The idea behind Sure Tech Investments LP and Prime Energy PE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.