Correlation Between Diversified Energy and Transurban

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

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

Diversification Opportunities for Diversified Energy and Transurban

-0.51

Correlation Coefficient

Diversified Energy  Transurban

Excellent diversification

The 3 months correlation between Diversified and Transurban is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and Transurban Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transurban Group and Diversified 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 Diversified Energy are associated (or correlated) with Transurban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transurban Group has no effect on the direction of Diversified Energy i.e., Diversified Energy and Transurban go up and down completely randomly.

Pair Corralation between Diversified Energy and Transurban

Considering the 90-day investment horizon Diversified Energy is expected to generate 0.94 times more return on investment than Transurban. However, Diversified Energy is 1.06 times less risky than Transurban. It trades about 0.25 of its potential returns per unit of risk. Transurban Group is currently generating about -0.09 per unit of risk. If you would invest  1,091  in Diversified Energy on September 12, 2024 and sell it today you would earn a total of  459.00  from holding Diversified Energy or generate 42.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Diversified Energy  vs.  Transurban Group

Diversified Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Energy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Diversified Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Transurban Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transurban Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Diversified Energy and Transurban

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

The idea behind Diversified Energy and Transurban Group 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.