Correlation Between STEP Energy and Source Energy

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

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

Diversification Opportunities for STEP Energy and Source Energy

0.83

Correlation Coefficient

STEP Energy  Source Energy

Very poor diversification

The 3 months correlation between STEP and Source is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding STEP Energy Services and Source Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Energy Services and STEP 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 STEP Energy Services are associated (or correlated) with Source Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Energy Services has no effect on the direction of STEP Energy i.e., STEP Energy and Source Energy go up and down completely randomly.

Pair Corralation between STEP Energy and Source Energy

Assuming the 90 days trading horizon STEP Energy is expected to generate 1.02 times less return on investment than Source Energy. But when comparing it to its historical volatility, STEP Energy Services is 1.72 times less risky than Source Energy. It trades about 0.08 of its potential returns per unit of risk. Source Energy Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,198  in Source Energy Services on May 14, 2025 and sell it today you would earn a total of  74.00  from holding Source Energy Services or generate 6.18% return on investment over 90 days.

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

STEP Energy Services  vs.  Source Energy Services

STEP Energy Services

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in STEP Energy Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, STEP Energy may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Source Energy Services

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Source Energy Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Source Energy may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with STEP Energy and Source Energy

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

The idea behind STEP Energy Services and Source Energy Services 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.