Correlation Between San Juan and Alamo Energy

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

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

Diversification Opportunities for San Juan and Alamo Energy

0.0

Correlation Coefficient

San Juan  Alamo Energy

Pay attention - limited upside

The 3 months correlation between San and Alamo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Alamo Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Energy Corp and San Juan 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 San Juan Basin are associated (or correlated) with Alamo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Energy Corp has no effect on the direction of San Juan i.e., San Juan and Alamo Energy go up and down completely randomly.

Pair Corralation between San Juan and Alamo Energy

Considering the 90-day investment horizon San Juan Basin is expected to under-perform the Alamo Energy. But the stock apears to be less risky and, when comparing its historical volatility, San Juan Basin is 24.22 times less risky than Alamo Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Alamo Energy Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Alamo Energy Corp on September 26, 2024 and sell it today you would earn a total of  0.00  from holding Alamo Energy Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

San Juan Basin  vs.  Alamo Energy Corp

San Juan Basin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, San Juan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Alamo Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alamo Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Alamo Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with San Juan and Alamo Energy

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

The idea behind San Juan Basin and Alamo 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.