Correlation Between Select Energy and Heritage-Crystal

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Can any of the company-specific risk be diversified away by investing in both Select Energy and Heritage-Crystal 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 Heritage-Crystal 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 Heritage Crystal Clean, you can compare the effects of market volatilities on Select Energy and Heritage-Crystal 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 Heritage-Crystal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Energy and Heritage-Crystal.

Diversification Opportunities for Select Energy and Heritage-Crystal

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Select and Heritage-Crystal is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services and Heritage-Crystal Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage-Crystal Clean 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 Heritage-Crystal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage-Crystal Clean has no effect on the direction of Select Energy i.e., Select Energy and Heritage-Crystal go up and down completely randomly.

Pair Corralation between Select Energy and Heritage-Crystal

Given the investment horizon of 90 days Select Energy is expected to generate 1.9 times less return on investment than Heritage-Crystal. In addition to that, Select Energy is 1.46 times more volatile than Heritage Crystal Clean. It trades about 0.03 of its total potential returns per unit of risk. Heritage Crystal Clean is currently generating about 0.07 per unit of volatility. If you would invest  2,837  in Heritage Crystal Clean on December 30, 2023 and sell it today you would earn a total of  1,714  from holding Heritage Crystal Clean or generate 60.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy77.53%
ValuesDaily Returns

Select Energy Services  vs.  Heritage-Crystal Clean

 Performance 
       Timeline  
Select Energy Services 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
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.
Heritage-Crystal Clean 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Heritage Crystal Clean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Heritage-Crystal is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Select Energy and Heritage-Crystal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Select Energy and Heritage-Crystal

The main advantage of trading using opposite Select Energy and Heritage-Crystal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Energy position performs unexpectedly, Heritage-Crystal 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 Heritage-Crystal will offset losses from the drop in Heritage-Crystal's long position.
The idea behind Select Energy Services and Heritage Crystal Clean 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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