Correlation Between ACT Energy and Western Energy

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

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

Diversification Opportunities for ACT Energy and Western Energy

-0.56

Correlation Coefficient

ACT Energy  Western Energy

Excellent diversification

The 3 months correlation between ACT and Western is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ACT Energy Technologies and Western Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Energy Services and ACT 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 ACT Energy Technologies are associated (or correlated) with Western Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Energy Services has no effect on the direction of ACT Energy i.e., ACT Energy and Western Energy go up and down completely randomly.

Pair Corralation between ACT Energy and Western Energy

Assuming the 90 days trading horizon ACT Energy Technologies is expected to under-perform the Western Energy. But the stock apears to be less risky and, when comparing its historical volatility, ACT Energy Technologies is 2.45 times less risky than Western Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Western Energy Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Western Energy Services on April 21, 2025 and sell it today you would earn a total of  8.00  from holding Western Energy Services or generate 3.81% return on investment over 90 days.

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

ACT Energy Technologies  vs.  Western Energy Services

ACT Energy Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days ACT Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ACT Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Western Energy Services

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Energy Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Western Energy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ACT Energy and Western Energy

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

The idea behind ACT Energy Technologies and Western 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..