Correlation Between Calima Energy and Arete Industries

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

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

Diversification Opportunities for Calima Energy and Arete Industries

0.0

Correlation Coefficient

Calima Energy  Arete Industries

Pay attention - limited upside

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

Pair Corralation between Calima Energy and Arete Industries

If you would invest  1.00  in Calima Energy Limited on September 1, 2024 and sell it today you would earn a total of  0.25  from holding Calima Energy Limited or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Calima Energy Limited  vs.  Arete Industries

Calima Energy Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calima Energy Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Calima Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Arete Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Calima Energy and Arete Industries

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

The idea behind Calima Energy Limited and Arete Industries 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.