Correlation Between ADX Energy and Daybreak Oil

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

By analyzing existing cross correlation between ADX Energy and Daybreak Oil and, you can compare the effects of market volatilities on ADX Energy and Daybreak Oil 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 Daybreak Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADX Energy and Daybreak Oil.

Diversification Opportunities for ADX Energy and Daybreak Oil

-0.15

Correlation Coefficient

ADX Energy  Daybreak Oil

Good diversification

The 3 months correlation between ADX and Daybreak is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding ADX Energy and Daybreak Oil and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daybreak Oil 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 Daybreak Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daybreak Oil has no effect on the direction of ADX Energy i.e., ADX Energy and Daybreak Oil go up and down completely randomly.

Pair Corralation between ADX Energy and Daybreak Oil

Assuming the 90 days horizon ADX Energy is expected to under-perform the Daybreak Oil. But the pink sheet apears to be less risky and, when comparing its historical volatility, ADX Energy is 1.79 times less risky than Daybreak Oil. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Daybreak Oil and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Daybreak Oil and on September 3, 2024 and sell it today you would earn a total of  0.01  from holding Daybreak Oil and or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

ADX Energy  vs.  Daybreak Oil and

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.

Daybreak Oil

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daybreak Oil and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Daybreak Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADX Energy and Daybreak Oil

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

The idea behind ADX Energy and Daybreak Oil and 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.