Correlation Between Suzuki and Essential Energy

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

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

Diversification Opportunities for Suzuki and Essential Energy

-0.5

Correlation Coefficient

Suzuki  Essential Energy

Very good diversification

The 3 months correlation between Suzuki and Essential is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Suzuki Motor and Essential Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Energy Services and Suzuki 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 Suzuki Motor are associated (or correlated) with Essential Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Energy Services has no effect on the direction of Suzuki i.e., Suzuki and Essential Energy go up and down completely randomly.

Pair Corralation between Suzuki and Essential Energy

If you would invest  1,066  in Suzuki Motor on September 13, 2024 and sell it today you would earn a total of  84.00  from holding Suzuki Motor or generate 7.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Suzuki Motor  vs.  Essential Energy Services

Suzuki Motor

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suzuki Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Suzuki may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Essential Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Suzuki and Essential Energy

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

The idea behind Suzuki Motor and Essential Energy Services 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.