Correlation Between Gap and Select Energy

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

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

Diversification Opportunities for Gap and Select Energy

-0.4

Correlation Coefficient

Gap  Select Energy

Very good diversification

The 3 months correlation between Gap and Select is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Gap and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services and Gap 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 The Gap are associated (or correlated) with Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Gap i.e., Gap and Select Energy go up and down completely randomly.

Pair Corralation between Gap and Select Energy

Assuming the 90 days horizon Gap is expected to generate 1.62 times less return on investment than Select Energy. In addition to that, Gap is 1.38 times more volatile than Select Energy Services. It trades about 0.03 of its total potential returns per unit of risk. Select Energy Services is currently generating about 0.06 per unit of volatility. If you would invest  744.00  in Select Energy Services on April 24, 2025 and sell it today you would earn a total of  61.00  from holding Select Energy Services or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

The Gap  vs.  Select Energy Services

Gap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gap may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Select Energy Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Select Energy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Gap and Select Energy

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

The idea behind The Gap and Select 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.