Correlation Between Sparta Capital and PrimeEnergy

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

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

Diversification Opportunities for Sparta Capital and PrimeEnergy

0.38

Correlation Coefficient

Sparta Capital  PrimeEnergy

Weak diversification

The 3 months correlation between Sparta and PrimeEnergy is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and PrimeEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrimeEnergy and Sparta Capital 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 Sparta Capital are associated (or correlated) with PrimeEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrimeEnergy has no effect on the direction of Sparta Capital i.e., Sparta Capital and PrimeEnergy go up and down completely randomly.

Pair Corralation between Sparta Capital and PrimeEnergy

Assuming the 90 days horizon Sparta Capital is expected to generate 20.54 times more return on investment than PrimeEnergy. However, Sparta Capital is 20.54 times more volatile than PrimeEnergy. It trades about 0.21 of its potential returns per unit of risk. PrimeEnergy is currently generating about 0.09 per unit of risk. If you would invest  1.21  in Sparta Capital on February 3, 2024 and sell it today you would earn a total of  1.79  from holding Sparta Capital or generate 147.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Sparta Capital  vs.  PrimeEnergy

Sparta Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sparta Capital reported solid returns over the last few months and may actually be approaching a breakup point.

PrimeEnergy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, PrimeEnergy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sparta Capital and PrimeEnergy

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

The idea behind Sparta Capital and PrimeEnergy 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 Commodity Directory module to find actively traded commodities issued by global exchanges.