Correlation Between Arrow Exploration and Alamo Energy

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

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

Diversification Opportunities for Arrow Exploration and Alamo Energy

-0.32

Correlation Coefficient

Arrow Exploration  Alamo Energy

Very good diversification

The 3 months correlation between Arrow and Alamo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Exploration Corp and Alamo Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Energy Corp and Arrow Exploration 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 Arrow Exploration Corp are associated (or correlated) with Alamo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Energy Corp has no effect on the direction of Arrow Exploration i.e., Arrow Exploration and Alamo Energy go up and down completely randomly.

Pair Corralation between Arrow Exploration and Alamo Energy

Assuming the 90 days horizon Arrow Exploration Corp is expected to under-perform the Alamo Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Arrow Exploration Corp is 13.79 times less risky than Alamo Energy. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Alamo Energy Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Alamo Energy Corp on September 3, 2024 and sell it today you would earn a total of  0.01  from holding Alamo Energy Corp or generate 9.223372036854776E16% return on investment over 90 days.

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

Arrow Exploration Corp  vs.  Alamo Energy Corp

Arrow Exploration Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alamo Energy Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Energy Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Alamo Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Exploration and Alamo Energy

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

The idea behind Arrow Exploration Corp and Alamo Energy Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.