Correlation Between MMEX Resources and ADX Energy

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

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

Diversification Opportunities for MMEX Resources and ADX Energy

0.17

Correlation Coefficient

MMEX Resources  ADX Energy

Average diversification

The 3 months correlation between MMEX and ADX is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding MMEX Resources Corp and ADX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX Energy and MMEX Resources 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 MMEX Resources Corp are associated (or correlated) with ADX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX Energy has no effect on the direction of MMEX Resources i.e., MMEX Resources and ADX Energy go up and down completely randomly.

Pair Corralation between MMEX Resources and ADX Energy

Given the investment horizon of 90 days MMEX Resources Corp is expected to generate 15.24 times more return on investment than ADX Energy. However, MMEX Resources is 15.24 times more volatile than ADX Energy. It trades about 0.28 of its potential returns per unit of risk. ADX Energy is currently generating about -0.12 per unit of risk. If you would invest  0.01  in MMEX Resources Corp on September 16, 2024 and sell it today you would earn a total of  0.00  from holding MMEX Resources Corp or generate 0.0% return on investment over 90 days.

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

MMEX Resources Corp  vs.  ADX Energy

MMEX Resources Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MMEX Resources Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, MMEX Resources showed solid returns over the last few months and may actually be approaching a breakup point.

ADX Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADX Energy 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MMEX Resources and ADX Energy

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

The idea behind MMEX Resources Corp and ADX 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.