Correlation Between RS Public and Energy Absolute

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

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

Diversification Opportunities for RS Public and Energy Absolute

0.18

Correlation Coefficient

RS Public  Energy Absolute

Average diversification

The 3 months correlation between RS-R and Energy is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding RS Public and Energy Absolute Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Absolute Public and RS Public 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 RS Public are associated (or correlated) with Energy Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Absolute Public has no effect on the direction of RS Public i.e., RS Public and Energy Absolute go up and down completely randomly.

Pair Corralation between RS Public and Energy Absolute

Assuming the 90 days trading horizon RS Public is expected to generate 29.53 times more return on investment than Energy Absolute. However, RS Public is 29.53 times more volatile than Energy Absolute Public. It trades about 0.16 of its potential returns per unit of risk. Energy Absolute Public is currently generating about 0.03 per unit of risk. If you would invest  720.00  in RS Public on September 2, 2024 and sell it today you would lose (150.00) from holding RS Public or give up 20.83% of portfolio value over 90 days.

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

RS Public  vs.  Energy Absolute Public

RS Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RS Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, RS Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Energy Absolute Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Absolute Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Energy Absolute may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RS Public and Energy Absolute

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

The idea behind RS Public and Energy Absolute Public 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.