Correlation Between North European and Genel Energy

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

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

Diversification Opportunities for North European and Genel Energy

0.5

Correlation Coefficient

North European  Genel Energy

Very weak diversification

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

Pair Corralation between North European and Genel Energy

Considering the 90-day investment horizon North European Oil is expected to under-perform the Genel Energy. But the stock apears to be less risky and, when comparing its historical volatility, North European Oil is 1.13 times less risky than Genel Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Genel Energy plc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  105.00  in Genel Energy plc on June 29, 2024 and sell it today you would lose (9.00) from holding Genel Energy plc or give up 8.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

North European Oil  vs.  Genel Energy plc

North European Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North European Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in October 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Genel Energy plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genel Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with North European and Genel Energy

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

The idea behind North European Oil and Genel Energy plc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.