Correlation Between Energy Absolute and CP ALL

Can any of the company-specific risk be diversified away by investing in both Energy Absolute and CP ALL 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 CP ALL 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 CP ALL Public, you can compare the effects of market volatilities on Energy Absolute and CP ALL 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 CP ALL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Absolute and CP ALL.

Diversification Opportunities for Energy Absolute and CP ALL

0.68

Correlation Coefficient

Energy Absolute  CP ALL

Poor diversification

The 3 months correlation between Energy and CPALL is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Energy Absolute Public and CP ALL Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CP ALL Public 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 CP ALL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CP ALL Public has no effect on the direction of Energy Absolute i.e., Energy Absolute and CP ALL go up and down completely randomly.

Pair Corralation between Energy Absolute and CP ALL

Assuming the 90 days horizon Energy Absolute Public is expected to generate 4.65 times more return on investment than CP ALL. However, Energy Absolute is 4.65 times more volatile than CP ALL Public. It trades about 0.01 of its potential returns per unit of risk. CP ALL Public is currently generating about 0.04 per unit of risk. If you would invest  625.00  in Energy Absolute Public on September 4, 2024 and sell it today you would lose (40.00) from holding Energy Absolute Public or give up 6.4% of portfolio value over 90 days.

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

Energy Absolute Public  vs.  CP ALL Public

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 quite persistent fundamental drivers, Energy Absolute is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CP ALL Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CP ALL Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, CP ALL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Absolute and CP ALL

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

The idea behind Energy Absolute Public and CP ALL Public 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.