Correlation Between Valeura Energy and Energy Revenue

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

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

Diversification Opportunities for Valeura Energy and Energy Revenue

0.12

Correlation Coefficient

Valeura Energy  Energy Revenue

Average diversification

The 3 months correlation between Valeura and Energy is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Energy Revenue Amer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Revenue Amer and Valeura 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 Valeura Energy are associated (or correlated) with Energy Revenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Revenue Amer has no effect on the direction of Valeura Energy i.e., Valeura Energy and Energy Revenue go up and down completely randomly.

Pair Corralation between Valeura Energy and Energy Revenue

Assuming the 90 days horizon Valeura Energy is expected to generate 10.45 times less return on investment than Energy Revenue. But when comparing it to its historical volatility, Valeura Energy is 6.61 times less risky than Energy Revenue. It trades about 0.08 of its potential returns per unit of risk. Energy Revenue Amer is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Energy Revenue Amer on September 3, 2024 and sell it today you would earn a total of  1.61  from holding Energy Revenue Amer or generate 84.74% return on investment over 90 days.

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

Valeura Energy  vs.  Energy Revenue Amer

Valeura Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Energy Revenue Amer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Revenue Amer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Energy Revenue displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valeura Energy and Energy Revenue

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

The idea behind Valeura Energy and Energy Revenue Amer 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.