Correlation Between US Energy and Epsilon Energy
Can any of the company-specific risk be diversified away by investing in both US Energy and Epsilon 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 US Energy and Epsilon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Energy Corp and Epsilon Energy, you can compare the effects of market volatilities on US Energy and Epsilon 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 US Energy with a short position of Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Energy and Epsilon Energy.
Diversification Opportunities for US Energy and Epsilon Energy
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between USEG and Epsilon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and US 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 US Energy Corp are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of US Energy i.e., US Energy and Epsilon Energy go up and down completely randomly.
Pair Corralation between US Energy and Epsilon Energy
Given the investment horizon of 90 days US Energy Corp is expected to generate 2.26 times more return on investment than Epsilon Energy. However, US Energy is 2.26 times more volatile than Epsilon Energy. It trades about 0.14 of its potential returns per unit of risk. Epsilon Energy is currently generating about 0.05 per unit of risk. If you would invest 98.00 in US Energy Corp on September 24, 2024 and sell it today you would earn a total of 51.00 from holding US Energy Corp or generate 52.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
US Energy Corp vs. Epsilon Energy
Performance |
Timeline |
US Energy Corp |
Epsilon Energy |
US Energy and Epsilon Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with US Energy and Epsilon Energy
The main advantage of trading using opposite US Energy and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Energy position performs unexpectedly, Epsilon 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 Epsilon Energy will offset losses from the drop in Epsilon Energy's long position.US Energy vs. PEDEVCO Corp | US Energy vs. Houston American Energy | US Energy vs. PHX Minerals | US Energy vs. Trio Petroleum Corp |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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