Correlation Between Whirlpool and Energy Focu

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

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

Diversification Opportunities for Whirlpool and Energy Focu

-0.59

Correlation Coefficient

Whirlpool  Energy Focu

Excellent diversification

The 3 months correlation between Whirlpool and Energy is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool and Energy Focu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Focu and Whirlpool 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 Whirlpool are associated (or correlated) with Energy Focu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Focu has no effect on the direction of Whirlpool i.e., Whirlpool and Energy Focu go up and down completely randomly.

Pair Corralation between Whirlpool and Energy Focu

Considering the 90-day investment horizon Whirlpool is expected to under-perform the Energy Focu. But the stock apears to be less risky and, when comparing its historical volatility, Whirlpool is 4.96 times less risky than Energy Focu. The stock trades about -0.1 of its potential returns per unit of risk. The Energy Focu is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  121.00  in Energy Focu on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Energy Focu or generate 52.89% return on investment over 90 days.

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

Whirlpool  vs.  Energy Focu

Whirlpool

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whirlpool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Energy Focu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Energy Focu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Whirlpool and Energy Focu

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

The idea behind Whirlpool and Energy Focu 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.