Correlation Between Diversified Energy and CBRE Group

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

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

Diversification Opportunities for Diversified Energy and CBRE Group

-0.74

Correlation Coefficient

Diversified Energy  CBRE Group

Pay attention - limited upside

The 3 months correlation between Diversified and CBRE is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and CBRE Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBRE Group Class and Diversified 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 Diversified Energy are associated (or correlated) with CBRE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBRE Group Class has no effect on the direction of Diversified Energy i.e., Diversified Energy and CBRE Group go up and down completely randomly.

Pair Corralation between Diversified Energy and CBRE Group

Considering the 90-day investment horizon Diversified Energy is expected to generate 1.71 times more return on investment than CBRE Group. However, Diversified Energy is 1.71 times more volatile than CBRE Group Class. It trades about 0.16 of its potential returns per unit of risk. CBRE Group Class is currently generating about -0.07 per unit of risk. If you would invest  1,149  in Diversified Energy on March 13, 2024 and sell it today you would earn a total of  327.00  from holding Diversified Energy or generate 28.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Diversified Energy  vs.  CBRE Group Class

Diversified Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Diversified Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

CBRE Group Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBRE Group Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Diversified Energy and CBRE Group

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

The idea behind Diversified Energy and CBRE Group Class 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.