Correlation Between Secure Energy and Western Energy

Can any of the company-specific risk be diversified away by investing in both Secure 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 Secure 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 Secure Energy Services and Western Energy Services, you can compare the effects of market volatilities on Secure 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 Secure Energy with a short position of Western Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Secure Energy and Western Energy.

Diversification Opportunities for Secure Energy and Western Energy

0.34

Correlation Coefficient

Secure Energy  Western Energy

Weak diversification

The 3 months correlation between Secure and Western is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Secure Energy Services 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 Secure 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 Secure Energy Services 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 Secure Energy i.e., Secure Energy and Western Energy go up and down completely randomly.

Pair Corralation between Secure Energy and Western Energy

Assuming the 90 days trading horizon Secure Energy Services is expected to generate 0.52 times more return on investment than Western Energy. However, Secure Energy Services is 1.93 times less risky than Western Energy. It trades about 0.18 of its potential returns per unit of risk. Western Energy Services is currently generating about 0.01 per unit of risk. If you would invest  1,332  in Secure Energy Services on April 24, 2025 and sell it today you would earn a total of  289.00  from holding Secure Energy Services or generate 21.7% return on investment over 90 days.

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

Secure Energy Services  vs.  Western Energy Services

Secure Energy Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Secure Energy Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Secure Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Western Energy Services

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Secure Energy and Western Energy

The main advantage of trading using opposite Secure Energy and Western Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Secure 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 Secure Energy Services 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.