Correlation Between Crew Energy and Alamo Energy

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

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

Diversification Opportunities for Crew Energy and Alamo Energy

0.28

Correlation Coefficient

Crew Energy  Alamo Energy

Modest diversification

The 3 months correlation between Crew and Alamo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Crew Energy 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 Crew 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 Crew Energy 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 Crew Energy i.e., Crew Energy and Alamo Energy go up and down completely randomly.

Pair Corralation between Crew Energy and Alamo Energy

Assuming the 90 days horizon Crew Energy is expected to generate 24.74 times less return on investment than Alamo Energy. But when comparing it to its historical volatility, Crew Energy is 90.4 times less risky than Alamo Energy. It trades about 0.46 of its potential returns per unit of risk. 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 12, 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 Together
Strength	Very Weak
Accuracy	26.98%
Values	Daily Returns

Crew Energy  vs.  Alamo Energy Corp

Crew Energy

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Crew Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile technical and fundamental indicators, Crew Energy reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak primary indicators, Alamo Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crew Energy and Alamo Energy

The main advantage of trading using opposite Crew Energy and Alamo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crew Energy 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 Crew Energy 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.