Correlation Between Rockdale Resources and Buru Energy

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

By analyzing existing cross correlation between Rockdale Resources Corp and Buru Energy Limited, you can compare the effects of market volatilities on Rockdale Resources and Buru 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 Rockdale Resources with a short position of Buru Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockdale Resources and Buru Energy.

Diversification Opportunities for Rockdale Resources and Buru Energy

0.24

Correlation Coefficient

Rockdale Resources  Buru Energy

Modest diversification

The 3 months correlation between Rockdale and Buru is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rockdale Resources Corp and Buru Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buru Energy Limited and Rockdale Resources 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 Rockdale Resources Corp are associated (or correlated) with Buru Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buru Energy Limited has no effect on the direction of Rockdale Resources i.e., Rockdale Resources and Buru Energy go up and down completely randomly.

Pair Corralation between Rockdale Resources and Buru Energy

Given the investment horizon of 90 days Rockdale Resources Corp is expected to under-perform the Buru Energy. In addition to that, Rockdale Resources is 3.14 times more volatile than Buru Energy Limited. It trades about -0.17 of its total potential returns per unit of risk. Buru Energy Limited is currently generating about -0.18 per unit of volatility. If you would invest  10.00  in Buru Energy Limited on September 1, 2024 and sell it today you would lose (5.00) from holding Buru Energy Limited or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	57.14%
Values	Daily Returns

Rockdale Resources Corp  vs.  Buru Energy Limited

Rockdale Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockdale Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Buru Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buru Energy Limited 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Rockdale Resources and Buru Energy

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

The idea behind Rockdale Resources Corp and Buru Energy Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.