Correlation Between Foothills Exploration and Alpha Energy

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

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

Diversification Opportunities for Foothills Exploration and Alpha Energy

0.0

Correlation Coefficient

Foothills Exploration  Alpha Energy

Pay attention - limited upside

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

Pair Corralation between Foothills Exploration and Alpha Energy

Given the investment horizon of 90 days Foothills Exploration is expected to generate 3.76 times more return on investment than Alpha Energy. However, Foothills Exploration is 3.76 times more volatile than Alpha Energy. It trades about 0.12 of its potential returns per unit of risk. Alpha Energy is currently generating about -0.05 per unit of risk. If you would invest  0.02  in Foothills Exploration on September 24, 2024 and sell it today you would lose (0.01) from holding Foothills Exploration or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	27.97%
Values	Daily Returns

Foothills Exploration  vs.  Alpha Energy

Foothills Exploration

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Alpha Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Alpha Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Foothills Exploration and Alpha Energy

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

The idea behind Foothills Exploration and Alpha 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.