Correlation Between Beach Energy and COG Financial

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

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

Diversification Opportunities for Beach Energy and COG Financial

-0.34

Correlation Coefficient

Beach Energy  COG Financial

Very good diversification

The 3 months correlation between Beach and COG is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and COG Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COG Financial Services and Beach 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 Beach Energy are associated (or correlated) with COG Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COG Financial Services has no effect on the direction of Beach Energy i.e., Beach Energy and COG Financial go up and down completely randomly.

Pair Corralation between Beach Energy and COG Financial

Assuming the 90 days trading horizon Beach Energy is expected to generate 1.0 times more return on investment than COG Financial. However, Beach Energy is 1.0 times less risky than COG Financial. It trades about 0.01 of its potential returns per unit of risk. COG Financial Services is currently generating about -0.02 per unit of risk. If you would invest  146.00  in Beach Energy on September 26, 2024 and sell it today you would lose (7.00) from holding Beach Energy or give up 4.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Beach Energy  vs.  COG Financial Services

Beach Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beach Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Beach Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

COG Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COG Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, COG Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Beach Energy and COG Financial

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

The idea behind Beach Energy and COG Financial 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.