Correlation Between Barrel Energy and Alpha Energy

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

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

Diversification Opportunities for Barrel Energy and Alpha Energy

0.35

Correlation Coefficient

Barrel Energy  Alpha Energy

Weak diversification

The 3 months correlation between Barrel and Alpha is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Barrel Energy and Alpha Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Energy and Barrel 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 Barrel Energy are associated (or correlated) with Alpha Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Energy has no effect on the direction of Barrel Energy i.e., Barrel Energy and Alpha Energy go up and down completely randomly.

Pair Corralation between Barrel Energy and Alpha Energy

Given the investment horizon of 90 days Barrel Energy is expected to generate 1.57 times more return on investment than Alpha Energy. However, Barrel Energy is 1.57 times more volatile than Alpha Energy. It trades about 0.0 of its potential returns per unit of risk. Alpha Energy is currently generating about -0.05 per unit of risk. If you would invest  6.11  in Barrel Energy on September 24, 2024 and sell it today you would lose (5.89) from holding Barrel Energy or give up 96.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	27.97%
Values	Daily Returns

Barrel Energy  vs.  Alpha Energy

Barrel Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrel Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Barrel Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Alpha Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Alpha Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Barrel Energy and Alpha Energy

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

The idea behind Barrel Energy and Alpha Energy 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.