Correlation Between Essential Energy and Koil Energy

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

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

Diversification Opportunities for Essential Energy and Koil Energy

0.78

Correlation Coefficient

Essential Energy  Koil Energy

Poor diversification

The 3 months correlation between Essential and Koil is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Essential Energy Services and Koil Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koil Energy Solutions and Essential 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 Essential Energy Services are associated (or correlated) with Koil Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koil Energy Solutions has no effect on the direction of Essential Energy i.e., Essential Energy and Koil Energy go up and down completely randomly.

Pair Corralation between Essential Energy and Koil Energy

If you would invest  120.00  in Koil Energy Solutions on September 4, 2024 and sell it today you would earn a total of  68.00  from holding Koil Energy Solutions or generate 56.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Essential Energy Services  vs.  Koil Energy Solutions

Essential Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essential Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Essential Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Koil Energy Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Koil Energy Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Koil Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Essential Energy and Koil Energy

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

The idea behind Essential Energy Services and Koil Energy Solutions 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.