Correlation Between Empire Global and Calima Energy

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

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

Diversification Opportunities for Empire Global and Calima Energy

-0.78

Correlation Coefficient

Empire Global  Calima Energy

Pay attention - limited upside

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

Pair Corralation between Empire Global and Calima Energy

Given the investment horizon of 90 days Empire Global Gaming is expected to under-perform the Calima Energy. In addition to that, Empire Global is 4.77 times more volatile than Calima Energy Limited. It trades about -0.17 of its total potential returns per unit of risk. Calima Energy Limited is currently generating about 0.12 per unit of volatility. If you would invest  1.00  in Calima Energy Limited on September 3, 2024 and sell it today you would earn a total of  0.25  from holding Calima Energy Limited or generate 25.0% return on investment over 90 days.

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

Empire Global Gaming  vs.  Calima Energy Limited

Empire Global Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental 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.

Calima Energy Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calima Energy Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Calima Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire Global and Calima Energy

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

The idea behind Empire Global Gaming and Calima Energy Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.