Correlation Between Eternal Energy and Singha Estate

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

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

Diversification Opportunities for Eternal Energy and Singha Estate

-0.48

Correlation Coefficient

Eternal Energy  Singha Estate

Very good diversification

The 3 months correlation between Eternal and Singha is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Energy Public and Singha Estate Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singha Estate Public and Eternal 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 Eternal Energy Public are associated (or correlated) with Singha Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singha Estate Public has no effect on the direction of Eternal Energy i.e., Eternal Energy and Singha Estate go up and down completely randomly.

Pair Corralation between Eternal Energy and Singha Estate

Assuming the 90 days horizon Eternal Energy is expected to generate 1.93 times less return on investment than Singha Estate. But when comparing it to its historical volatility, Eternal Energy Public is 1.41 times less risky than Singha Estate. It trades about 0.04 of its potential returns per unit of risk. Singha Estate Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  184.00  in Singha Estate Public on September 26, 2024 and sell it today you would lose (93.00) from holding Singha Estate Public or give up 50.54% of portfolio value over 90 days.

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

Eternal Energy Public  vs.  Singha Estate Public

Eternal Energy Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Singha Estate Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singha Estate Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Singha Estate disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eternal Energy and Singha Estate

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

The idea behind Eternal Energy Public and Singha Estate 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.