Correlation Between Crew Energy and Surge Energy

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

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

Diversification Opportunities for Crew Energy and Surge Energy

0.8

Correlation Coefficient

Crew Energy  Surge Energy

Very poor diversification

The 3 months correlation between Crew and Surge is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Crew Energy and Surge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Energy and Crew 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 Crew Energy are associated (or correlated) with Surge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Energy has no effect on the direction of Crew Energy i.e., Crew Energy and Surge Energy go up and down completely randomly.

Pair Corralation between Crew Energy and Surge Energy

Assuming the 90 days horizon Crew Energy is expected to generate 1.17 times more return on investment than Surge Energy. However, Crew Energy is 1.17 times more volatile than Surge Energy. It trades about -0.05 of its potential returns per unit of risk. Surge Energy is currently generating about -0.2 per unit of risk. If you would invest  475.00  in Crew Energy on February 8, 2024 and sell it today you would lose (14.00) from holding Crew Energy or give up 2.95% of portfolio value over 90 days.

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

Crew Energy  vs.  Surge Energy

Crew Energy

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crew Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Crew Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Surge Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Surge Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crew Energy and Surge Energy

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

The idea behind Crew Energy and Surge Energy 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.