Correlation Between Barrel Energy and Continental Energy

Can any of the company-specific risk be diversified away by investing in both Barrel Energy and Continental 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 Continental 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 Continental Energy, you can compare the effects of market volatilities on Barrel Energy and Continental 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 Continental Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barrel Energy and Continental Energy.

Diversification Opportunities for Barrel Energy and Continental Energy

0.0

Correlation Coefficient

Barrel Energy  Continental Energy

Pay attention - limited upside

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

Pair Corralation between Barrel Energy and Continental Energy

If you would invest  0.90  in Barrel Energy on September 24, 2024 and sell it today you would lose (0.68) from holding Barrel Energy or give up 75.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Barrel Energy  vs.  Continental 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.

Continental Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Continental Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Continental Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Barrel Energy and Continental Energy

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

The idea behind Barrel Energy and Continental 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.