Correlation Between MicroStrategy Incorporated and Peninsula Energy

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

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

Diversification Opportunities for MicroStrategy Incorporated and Peninsula Energy

0.81

Correlation Coefficient

MicroStrategy Incorporated  Peninsula Energy

Very poor diversification

The 3 months correlation between MicroStrategy and Peninsula is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and Peninsula Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy and MicroStrategy Incorporated 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 MicroStrategy Incorporated 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 MicroStrategy Incorporated i.e., MicroStrategy Incorporated and Peninsula Energy go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and Peninsula Energy

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to generate 12.5 times less return on investment than Peninsula Energy. But when comparing it to its historical volatility, MicroStrategy Incorporated is 20.07 times less risky than Peninsula Energy. It trades about 0.24 of its potential returns per unit of risk. Peninsula Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6.82  in Peninsula Energy on September 13, 2024 and sell it today you would earn a total of  71.18  from holding Peninsula Energy or generate 1043.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.67%
Values	Daily Returns

MicroStrategy Incorporated  vs.  Peninsula Energy

MicroStrategy Incorporated

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, MicroStrategy Incorporated reported 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 MicroStrategy Incorporated and Peninsula Energy

The main advantage of trading using opposite MicroStrategy Incorporated and Peninsula Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroStrategy Incorporated 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 MicroStrategy Incorporated 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.