Correlation Between Cardinal Energy and Surge Energy

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

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

Diversification Opportunities for Cardinal Energy and Surge Energy

0.1

Correlation Coefficient

Cardinal Energy  Surge Energy

Average diversification

The 3 months correlation between Cardinal and Surge is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Energy and Surge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Energy and Cardinal 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 Cardinal Energy are associated (or correlated) with Surge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Energy has no effect on the direction of Cardinal Energy i.e., Cardinal Energy and Surge Energy go up and down completely randomly.

Pair Corralation between Cardinal Energy and Surge Energy

Assuming the 90 days horizon Cardinal Energy is expected to generate 0.59 times more return on investment than Surge Energy. However, Cardinal Energy is 1.7 times less risky than Surge Energy. It trades about 0.04 of its potential returns per unit of risk. Surge Energy is currently generating about -0.07 per unit of risk. If you would invest  627.00  in Cardinal Energy on September 12, 2024 and sell it today you would earn a total of  15.00  from holding Cardinal Energy or generate 2.39% return on investment over 90 days.

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

Cardinal Energy  vs.  Surge Energy

Cardinal Energy

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cardinal Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Surge Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cardinal Energy and Surge Energy

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

The idea behind Cardinal Energy and Surge Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.