Correlation Between San Juan and Ring Energy

Can any of the company-specific risk be diversified away by investing in both San Juan and Ring 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 Ring 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 Ring Energy, you can compare the effects of market volatilities on San Juan and Ring 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 Ring Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Juan and Ring Energy.

Diversification Opportunities for San Juan and Ring Energy

-0.28

Correlation Coefficient

San Juan  Ring Energy

Very good diversification

The 3 months correlation between San and Ring is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Ring Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ring Energy 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 Ring Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ring Energy has no effect on the direction of San Juan i.e., San Juan and Ring Energy go up and down completely randomly.

Pair Corralation between San Juan and Ring Energy

Considering the 90-day investment horizon San Juan Basin is expected to generate 1.69 times more return on investment than Ring Energy. However, San Juan is 1.69 times more volatile than Ring Energy. It trades about -0.04 of its potential returns per unit of risk. Ring Energy is currently generating about -0.53 per unit of risk. If you would invest  406.00  in San Juan Basin on September 26, 2024 and sell it today you would lose (15.00) from holding San Juan Basin or give up 3.69% of portfolio value over 90 days.

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

San Juan Basin  vs.  Ring Energy

San Juan Basin

Risk-Adjusted Performance

1 of 100

Very 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.

Ring Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with San Juan and Ring Energy

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

The idea behind San Juan Basin and Ring 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.