Correlation Between Reconnaissance Energy and Eco Oil

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

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

Diversification Opportunities for Reconnaissance Energy and Eco Oil

0.1

Correlation Coefficient

Reconnaissance Energy  Eco Oil

Average diversification

The 3 months correlation between Reconnaissance and Eco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Reconnaissance Energy Africa and Eco Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Oil Gas and Reconnaissance 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 Reconnaissance Energy Africa are associated (or correlated) with Eco Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Oil Gas has no effect on the direction of Reconnaissance Energy i.e., Reconnaissance Energy and Eco Oil go up and down completely randomly.

Pair Corralation between Reconnaissance Energy and Eco Oil

Assuming the 90 days horizon Reconnaissance Energy is expected to generate 1.73 times less return on investment than Eco Oil. But when comparing it to its historical volatility, Reconnaissance Energy Africa is 1.9 times less risky than Eco Oil. It trades about 0.02 of its potential returns per unit of risk. Eco Oil Gas is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Eco Oil Gas on September 19, 2024 and sell it today you would lose (1.00) from holding Eco Oil Gas or give up 6.25% of portfolio value over 90 days.

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

Reconnaissance Energy Africa  vs.  Eco Oil Gas

Reconnaissance Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reconnaissance Energy Africa are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reconnaissance Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Eco Oil Gas

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Oil Gas are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Eco Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Reconnaissance Energy and Eco Oil

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

The idea behind Reconnaissance Energy Africa and Eco Oil Gas 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.

Check out your portfolio center.

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.