Correlation Between Global Energy and Portofino Resources

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

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

Diversification Opportunities for Global Energy and Portofino Resources

0.09

Correlation Coefficient

Global Energy  Portofino Resources

Significant diversification

The 3 months correlation between Global and Portofino is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Global Energy Metals and Portofino Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portofino Resources and Global 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 Global Energy Metals are associated (or correlated) with Portofino Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portofino Resources has no effect on the direction of Global Energy i.e., Global Energy and Portofino Resources go up and down completely randomly.

Pair Corralation between Global Energy and Portofino Resources

Assuming the 90 days horizon Global Energy Metals is expected to generate 0.83 times more return on investment than Portofino Resources. However, Global Energy Metals is 1.21 times less risky than Portofino Resources. It trades about 0.05 of its potential returns per unit of risk. Portofino Resources is currently generating about 0.01 per unit of risk. If you would invest  1.42  in Global Energy Metals on September 26, 2024 and sell it today you would lose (0.02) from holding Global Energy Metals or give up 1.41% of portfolio value over 90 days.

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

Global Energy Metals  vs.  Portofino Resources

Global Energy Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Energy Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Global Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Portofino Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portofino Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating basic indicators, Portofino Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global Energy and Portofino Resources

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

The idea behind Global Energy Metals and Portofino Resources 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.