Correlation Between Pharos Energy and Best Buy
Can any of the company-specific risk be diversified away by investing in both Pharos Energy and Best Buy 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 Pharos Energy and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pharos Energy plc and Best Buy Co, you can compare the effects of market volatilities on Pharos Energy and Best Buy 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 Pharos Energy with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharos Energy and Best Buy.
Diversification Opportunities for Pharos Energy and Best Buy
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pharos and Best is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Pharos Energy plc and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Pharos 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 Pharos Energy plc are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Pharos Energy i.e., Pharos Energy and Best Buy go up and down completely randomly.
Pair Corralation between Pharos Energy and Best Buy
Assuming the 90 days horizon Pharos Energy plc is expected to generate 0.58 times more return on investment than Best Buy. However, Pharos Energy plc is 1.74 times less risky than Best Buy. It trades about 0.22 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.22 per unit of risk. If you would invest 25.00 in Pharos Energy plc on January 26, 2024 and sell it today you would earn a total of 1.00 from holding Pharos Energy plc or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pharos Energy plc vs. Best Buy Co
Performance |
| Timeline |
| Pharos Energy plc |
| Best Buy |
Pharos Energy and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pharos Energy and Best Buy
The main advantage of trading using opposite Pharos Energy and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pharos Energy position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| Pharos Energy vs. Pioneer Natural Resources | Pharos Energy vs. Permian Resources | Pharos Energy vs. Devon Energy | Pharos Energy vs. EOG Resources |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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