Correlation Between I3 Energy and ROK Resources

Can any of the company-specific risk be diversified away by investing in both I3 Energy and ROK Resources 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 I3 Energy and ROK Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between i3 Energy Plc and ROK Resources, you can compare the effects of market volatilities on I3 Energy and ROK Resources 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 I3 Energy with a short position of ROK Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of I3 Energy and ROK Resources.

Diversification Opportunities for I3 Energy and ROK Resources

-0.38

Correlation Coefficient

I3 Energy  ROK Resources

Very good diversification

The 3 months correlation between ITEEF and ROK is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding i3 Energy Plc and ROK Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROK Resources and I3 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 i3 Energy Plc are associated (or correlated) with ROK Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROK Resources has no effect on the direction of I3 Energy i.e., I3 Energy and ROK Resources go up and down completely randomly.

Pair Corralation between I3 Energy and ROK Resources

Assuming the 90 days horizon i3 Energy Plc is expected to generate 1.4 times more return on investment than ROK Resources. However, I3 Energy is 1.4 times more volatile than ROK Resources. It trades about -0.01 of its potential returns per unit of risk. ROK Resources is currently generating about -0.06 per unit of risk. If you would invest  16.00  in i3 Energy Plc on August 31, 2024 and sell it today you would lose (2.00) from holding i3 Energy Plc or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.19%
Values	Daily Returns

i3 Energy Plc  vs.  ROK Resources

i3 Energy Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days i3 Energy Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, I3 Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ROK Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROK Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with I3 Energy and ROK Resources

The main advantage of trading using opposite I3 Energy and ROK Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if I3 Energy position performs unexpectedly, ROK Resources 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 ROK Resources will offset losses from the drop in ROK Resources' long position.

The idea behind i3 Energy Plc and ROK Resources 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.