Correlation Between Energy Absolute and Com7 PCL

Can any of the company-specific risk be diversified away by investing in both Energy Absolute and Com7 PCL 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 Energy Absolute and Com7 PCL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy Absolute Public and Com7 PCL, you can compare the effects of market volatilities on Energy Absolute and Com7 PCL 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 Energy Absolute with a short position of Com7 PCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Absolute and Com7 PCL.

Diversification Opportunities for Energy Absolute and Com7 PCL

-0.65

Correlation Coefficient

Energy Absolute  Com7 PCL

Excellent diversification

The 3 months correlation between Energy and Com7 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Energy Absolute Public and Com7 PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Com7 PCL and Energy Absolute 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 Energy Absolute Public are associated (or correlated) with Com7 PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Com7 PCL has no effect on the direction of Energy Absolute i.e., Energy Absolute and Com7 PCL go up and down completely randomly.

Pair Corralation between Energy Absolute and Com7 PCL

Assuming the 90 days horizon Energy Absolute Public is expected to under-perform the Com7 PCL. In addition to that, Energy Absolute is 2.76 times more volatile than Com7 PCL. It trades about -0.17 of its total potential returns per unit of risk. Com7 PCL is currently generating about -0.01 per unit of volatility. If you would invest  2,750  in Com7 PCL on September 12, 2024 and sell it today you would lose (25.00) from holding Com7 PCL or give up 0.91% of portfolio value over 90 days.

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

Energy Absolute Public  vs.  Com7 PCL

Energy Absolute Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Absolute Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Com7 PCL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Com7 PCL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Com7 PCL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Energy Absolute and Com7 PCL

The main advantage of trading using opposite Energy Absolute and Com7 PCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Absolute position performs unexpectedly, Com7 PCL 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 Com7 PCL will offset losses from the drop in Com7 PCL's long position.

The idea behind Energy Absolute Public and Com7 PCL 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.