Correlation Between United Amern and Brookside Energy

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

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

Diversification Opportunities for United Amern and Brookside Energy

0.11

Correlation Coefficient

United Amern  Brookside Energy

Average diversification

The 3 months correlation between United and Brookside is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding United Amern Pete and Brookside Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookside Energy and United Amern 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 United Amern Pete are associated (or correlated) with Brookside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookside Energy has no effect on the direction of United Amern i.e., United Amern and Brookside Energy go up and down completely randomly.

Pair Corralation between United Amern and Brookside Energy

Given the investment horizon of 90 days United Amern is expected to generate 63.28 times less return on investment than Brookside Energy. But when comparing it to its historical volatility, United Amern Pete is 11.82 times less risky than Brookside Energy. It trades about 0.03 of its potential returns per unit of risk. Brookside Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.75  in Brookside Energy on October 1, 2024 and sell it today you would earn a total of  32.25  from holding Brookside Energy or generate 4300.0% return on investment over 90 days.

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

United Amern Pete  vs.  Brookside Energy

United Amern Pete

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Amern Pete are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, United Amern exhibited solid returns over the last few months and may actually be approaching a breakup point.

Brookside Energy

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Brookside Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Brookside Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Amern and Brookside Energy

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

The idea behind United Amern Pete and Brookside 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.