Correlation Between STEP Energy and Trican Well
Can any of the company-specific risk be diversified away by investing in both STEP Energy and Trican Well 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 STEP Energy and Trican Well into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STEP Energy Services and Trican Well Service, you can compare the effects of market volatilities on STEP Energy and Trican Well 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 STEP Energy with a short position of Trican Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEP Energy and Trican Well.
Diversification Opportunities for STEP Energy and Trican Well
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STEP and Trican is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding STEP Energy Services and Trican Well Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trican Well Service and STEP 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 STEP Energy Services are associated (or correlated) with Trican Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trican Well Service has no effect on the direction of STEP Energy i.e., STEP Energy and Trican Well go up and down completely randomly.
Pair Corralation between STEP Energy and Trican Well
Assuming the 90 days trading horizon STEP Energy Services is expected to generate 2.67 times more return on investment than Trican Well. However, STEP Energy is 2.67 times more volatile than Trican Well Service. It trades about 0.12 of its potential returns per unit of risk. Trican Well Service is currently generating about 0.06 per unit of risk. If you would invest 375.00 in STEP Energy Services on September 14, 2024 and sell it today you would earn a total of 145.00 from holding STEP Energy Services or generate 38.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
STEP Energy Services vs. Trican Well Service
Performance |
Timeline |
STEP Energy Services |
Trican Well Service |
STEP Energy and Trican Well Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with STEP Energy and Trican Well
The main advantage of trading using opposite STEP Energy and Trican Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEP Energy position performs unexpectedly, Trican Well 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 Trican Well will offset losses from the drop in Trican Well's long position.STEP Energy vs. Trican Well Service | STEP Energy vs. Calfrac Well Services | STEP Energy vs. Source Energy Services | STEP Energy vs. CES Energy Solutions |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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