Correlation Between Western Acquisition and Cheniere Energy

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

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

Diversification Opportunities for Western Acquisition and Cheniere Energy

0.18

Correlation Coefficient

Western Acquisition  Cheniere Energy

Average diversification

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

Pair Corralation between Western Acquisition and Cheniere Energy

Given the investment horizon of 90 days Western Acquisition is expected to generate 3.34 times less return on investment than Cheniere Energy. In addition to that, Western Acquisition is 1.5 times more volatile than Cheniere Energy Partners. It trades about 0.05 of its total potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.25 per unit of volatility. If you would invest  4,748  in Cheniere Energy Partners on September 3, 2024 and sell it today you would earn a total of  1,077  from holding Cheniere Energy Partners or generate 22.68% return on investment over 90 days.

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

Western Acquisition Ventures  vs.  Cheniere Energy Partners

Western Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cheniere Energy Partners

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Acquisition and Cheniere Energy

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

The idea behind Western Acquisition Ventures and Cheniere Energy Partners 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.