Correlation Between Paladin Energy and Berkeley Energy

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

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

Diversification Opportunities for Paladin Energy and Berkeley Energy

0.6

Correlation Coefficient

Paladin Energy  Berkeley Energy

Poor diversification

The 3 months correlation between Paladin and Berkeley is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Paladin Energy and Berkeley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Energy and Paladin 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 Paladin Energy are associated (or correlated) with Berkeley Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Energy has no effect on the direction of Paladin Energy i.e., Paladin Energy and Berkeley Energy go up and down completely randomly.

Pair Corralation between Paladin Energy and Berkeley Energy

Assuming the 90 days horizon Paladin Energy is expected to under-perform the Berkeley Energy. In addition to that, Paladin Energy is 1.67 times more volatile than Berkeley Energy. It trades about -0.09 of its total potential returns per unit of risk. Berkeley Energy is currently generating about -0.01 per unit of volatility. If you would invest  24.00  in Berkeley Energy on September 23, 2024 and sell it today you would lose (1.00) from holding Berkeley Energy or give up 4.17% of portfolio value over 90 days.

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

Paladin Energy  vs.  Berkeley Energy

Paladin Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paladin Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Berkeley Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Paladin Energy and Berkeley Energy

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

The idea behind Paladin Energy and Berkeley 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.