Correlation Between Brooge Energy and CBL International

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

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

Diversification Opportunities for Brooge Energy and CBL International

-0.44

Correlation Coefficient

Brooge Energy  CBL International

Very good diversification

The 3 months correlation between Brooge and CBL is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Brooge Energy Limited and CBL International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBL International and Brooge 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 Brooge Energy Limited are associated (or correlated) with CBL International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBL International has no effect on the direction of Brooge Energy i.e., Brooge Energy and CBL International go up and down completely randomly.

Pair Corralation between Brooge Energy and CBL International

Assuming the 90 days horizon Brooge Energy Limited is expected to generate 4.62 times more return on investment than CBL International. However, Brooge Energy is 4.62 times more volatile than CBL International Limited. It trades about 0.06 of its potential returns per unit of risk. CBL International Limited is currently generating about 0.14 per unit of risk. If you would invest  0.36  in Brooge Energy Limited on September 29, 2024 and sell it today you would lose (0.29) from holding Brooge Energy Limited or give up 80.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	60.32%
Values	Daily Returns

Brooge Energy Limited  vs.  CBL International Limited

Brooge Energy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brooge Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Brooge Energy showed solid returns over the last few months and may actually be approaching a breakup point.

CBL International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CBL International Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, CBL International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brooge Energy and CBL International

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

The idea behind Brooge Energy Limited and CBL International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.