Correlation Between Energy Resources and Cameco Corp

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

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

Diversification Opportunities for Energy Resources and Cameco Corp

0.5

Correlation Coefficient

Energy Resources  Cameco Corp

Very weak diversification

The 3 months correlation between Energy and Cameco is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources of and Cameco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cameco Corp and Energy Resources 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 Energy Resources of are associated (or correlated) with Cameco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cameco Corp has no effect on the direction of Energy Resources i.e., Energy Resources and Cameco Corp go up and down completely randomly.

Pair Corralation between Energy Resources and Cameco Corp

Assuming the 90 days horizon Energy Resources of is expected to generate 19.66 times more return on investment than Cameco Corp. However, Energy Resources is 19.66 times more volatile than Cameco Corp. It trades about 0.11 of its potential returns per unit of risk. Cameco Corp is currently generating about 0.03 per unit of risk. If you would invest  6.00  in Energy Resources of on January 24, 2024 and sell it today you would lose (1.00) from holding Energy Resources of or give up 16.67% of portfolio value over 90 days.

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

Energy Resources of  vs.  Cameco Corp

Energy Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Resources of are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Energy Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Cameco Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cameco Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady fundamental indicators, Cameco Corp is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Energy Resources and Cameco Corp

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

The idea behind Energy Resources of and Cameco Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.