Correlation Between Palayan Resources and Xtra Energy

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

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

Diversification Opportunities for Palayan Resources and Xtra Energy

0.22

Correlation Coefficient

Palayan Resources  Xtra Energy

Modest diversification

The 3 months correlation between Palayan and Xtra is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Palayan Resources and Xtra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtra Energy Corp and Palayan 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 Palayan Resources are associated (or correlated) with Xtra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtra Energy Corp has no effect on the direction of Palayan Resources i.e., Palayan Resources and Xtra Energy go up and down completely randomly.

Pair Corralation between Palayan Resources and Xtra Energy

Given the investment horizon of 90 days Palayan Resources is expected to generate 25.51 times more return on investment than Xtra Energy. However, Palayan Resources is 25.51 times more volatile than Xtra Energy Corp. It trades about 0.17 of its potential returns per unit of risk. Xtra Energy Corp is currently generating about 0.03 per unit of risk. If you would invest  0.01  in Palayan Resources on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Palayan Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Palayan Resources  vs.  Xtra Energy Corp

Palayan Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palayan Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Palayan Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Xtra Energy Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtra Energy Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Xtra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palayan Resources and Xtra Energy

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

The idea behind Palayan Resources and Xtra 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.