Correlation Between Source Energy and Shawcor

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

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

Diversification Opportunities for Source Energy and Shawcor

0.77

Correlation Coefficient

Source Energy  Shawcor

Poor diversification

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

Pair Corralation between Source Energy and Shawcor

If you would invest  888.00  in Source Energy Services on September 5, 2024 and sell it today you would earn a total of  405.00  from holding Source Energy Services or generate 45.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Source Energy Services  vs.  Shawcor

Source Energy Services

Risk-Adjusted Performance

14 of 100

Good

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

Shawcor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shawcor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Shawcor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Source Energy and Shawcor

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

The idea behind Source Energy Services and Shawcor 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.