Correlation Between Barnwell Industries and Expand Energy

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

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

Diversification Opportunities for Barnwell Industries and Expand Energy

-0.91

Correlation Coefficient

Barnwell Industries  Expand Energy

Pay attention - limited upside

The 3 months correlation between Barnwell and Expand is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy and Barnwell Industries 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 Barnwell Industries are associated (or correlated) with Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Barnwell Industries i.e., Barnwell Industries and Expand Energy go up and down completely randomly.

Pair Corralation between Barnwell Industries and Expand Energy

Considering the 90-day investment horizon Barnwell Industries is expected to under-perform the Expand Energy. But the stock apears to be less risky and, when comparing its historical volatility, Barnwell Industries is 1.21 times less risky than Expand Energy. The stock trades about -0.16 of its potential returns per unit of risk. The Expand Energy is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  5,500  in Expand Energy on September 17, 2024 and sell it today you would earn a total of  3,090  from holding Expand Energy or generate 56.18% return on investment over 90 days.

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

Barnwell Industries  vs.  Expand Energy

Barnwell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barnwell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Expand Energy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expand Energy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Expand Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barnwell Industries and Expand Energy

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

The idea behind Barnwell Industries and Expand 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.