Correlation Between ADX Energy and Black Dragon

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

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

Diversification Opportunities for ADX Energy and Black Dragon

0.0

Correlation Coefficient

ADX Energy  Black Dragon

Pay attention - limited upside

The 3 months correlation between ADX and Black is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ADX Energy and Black Dragon Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Dragon Resource and ADX 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 ADX Energy are associated (or correlated) with Black Dragon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Dragon Resource has no effect on the direction of ADX Energy i.e., ADX Energy and Black Dragon go up and down completely randomly.

Pair Corralation between ADX Energy and Black Dragon

Assuming the 90 days horizon ADX Energy is expected to generate 13.79 times less return on investment than Black Dragon. But when comparing it to its historical volatility, ADX Energy is 4.45 times less risky than Black Dragon. It trades about 0.02 of its potential returns per unit of risk. Black Dragon Resource is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Black Dragon Resource on September 17, 2024 and sell it today you would earn a total of  0.01  from holding Black Dragon Resource or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

ADX Energy  vs.  Black Dragon Resource

ADX Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADX Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Black Dragon Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Dragon Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Black Dragon is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ADX Energy and Black Dragon

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

The idea behind ADX Energy and Black Dragon Resource 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.