Correlation Between Global E and Peninsula Energy

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

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

Diversification Opportunities for Global E and Peninsula Energy

0.94

Correlation Coefficient

Global E  Peninsula Energy

Almost no diversification

The 3 months correlation between Global and Peninsula is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Peninsula Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy and Global E 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 E Online are associated (or correlated) with Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Global E i.e., Global E and Peninsula Energy go up and down completely randomly.

Pair Corralation between Global E and Peninsula Energy

Given the investment horizon of 90 days Global E is expected to generate 22.98 times less return on investment than Peninsula Energy. But when comparing it to its historical volatility, Global E Online is 53.67 times less risky than Peninsula Energy. It trades about 0.29 of its potential returns per unit of risk. Peninsula Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5.75  in Peninsula Energy on September 13, 2024 and sell it today you would earn a total of  72.25  from holding Peninsula Energy or generate 1256.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Global E Online  vs.  Peninsula Energy

Global E Online

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Peninsula Energy

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Global E and Peninsula Energy

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

The idea behind Global E Online and Peninsula Energy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.