Correlation Between Nine Energy and Indonesia Energy

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

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

Diversification Opportunities for Nine Energy and Indonesia Energy

-0.26

Correlation Coefficient

Nine Energy  Indonesia Energy

Very good diversification

The 3 months correlation between Nine and Indonesia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nine Energy Service and Indonesia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesia Energy and Nine 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 Nine Energy Service are associated (or correlated) with Indonesia Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesia Energy has no effect on the direction of Nine Energy i.e., Nine Energy and Indonesia Energy go up and down completely randomly.

Pair Corralation between Nine Energy and Indonesia Energy

Given the investment horizon of 90 days Nine Energy Service is expected to under-perform the Indonesia Energy. But the stock apears to be less risky and, when comparing its historical volatility, Nine Energy Service is 1.4 times less risky than Indonesia Energy. The stock trades about -0.11 of its potential returns per unit of risk. The Indonesia Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Indonesia Energy on August 3, 2024 and sell it today you would earn a total of  59.00  from holding Indonesia Energy or generate 16.48% return on investment over 90 days.

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

Nine Energy Service  vs.  Indonesia Energy

Nine Energy Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nine Energy Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Indonesia Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Indonesia Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nine Energy and Indonesia Energy

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

The idea behind Nine Energy Service and Indonesia Energy 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.