Correlation Between Select Energy and Trinseo SA

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

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

Diversification Opportunities for Select Energy and Trinseo SA

-0.84

Correlation Coefficient

Select Energy  Trinseo SA

Pay attention - limited upside

The 3 months correlation between Select and Trinseo is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA and Select 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 Select Energy Services are associated (or correlated) with Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of Select Energy i.e., Select Energy and Trinseo SA go up and down completely randomly.

Pair Corralation between Select Energy and Trinseo SA

Given the investment horizon of 90 days Select Energy Services is expected to generate 0.23 times more return on investment than Trinseo SA. However, Select Energy Services is 4.4 times less risky than Trinseo SA. It trades about -0.11 of its potential returns per unit of risk. Trinseo SA is currently generating about -0.13 per unit of risk. If you would invest  946.00  in Select Energy Services on February 5, 2024 and sell it today you would lose (30.00) from holding Select Energy Services or give up 3.17% of portfolio value over 90 days.

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

Select Energy Services  vs.  Trinseo SA

Select Energy Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Select Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Trinseo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trinseo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Select Energy and Trinseo SA

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

The idea behind Select Energy Services and Trinseo SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.