Correlation Between Global Knafaim and Prime Energy

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

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

Diversification Opportunities for Global Knafaim and Prime Energy

0.77

Correlation Coefficient

Global Knafaim  Prime Energy

Poor diversification

The 3 months correlation between Global and Prime is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Global Knafaim Leasing and Prime Energy PE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Energy PE and Global Knafaim 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 Knafaim Leasing are associated (or correlated) with Prime Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Energy PE has no effect on the direction of Global Knafaim i.e., Global Knafaim and Prime Energy go up and down completely randomly.

Pair Corralation between Global Knafaim and Prime Energy

Assuming the 90 days trading horizon Global Knafaim is expected to generate 1.03 times less return on investment than Prime Energy. But when comparing it to its historical volatility, Global Knafaim Leasing is 1.64 times less risky than Prime Energy. It trades about 0.23 of its potential returns per unit of risk. Prime Energy PE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  71,090  in Prime Energy PE on September 14, 2024 and sell it today you would earn a total of  5,430  from holding Prime Energy PE or generate 7.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Global Knafaim Leasing  vs.  Prime Energy PE

Global Knafaim Leasing

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Knafaim Leasing are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Global Knafaim sustained solid returns over the last few months and may actually be approaching a breakup point.

Prime Energy PE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Energy PE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Knafaim and Prime Energy

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

The idea behind Global Knafaim Leasing and Prime Energy PE 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..