Correlation Between Select Energy and Heritage-Crystal
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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 77.53% |
Values | Daily Returns |
Select Energy Services vs. Heritage-Crystal Clean
Performance |
Timeline |
Select Energy Services |
Heritage-Crystal Clean |
Risk-Adjusted Performance
0 of 100
Low | High |
Very Weak
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.Select Energy vs. Chemours Co | Select Energy vs. Dupont De Nemours | Select Energy vs. FutureFuel Corp | Select Energy vs. Danimer Scientific |
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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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