Correlation Between US Energy and CKX Lands

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

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

Diversification Opportunities for US Energy and CKX Lands

-0.71

Correlation Coefficient

US Energy  CKX Lands

Pay attention - limited upside

The 3 months correlation between USEG and CKX is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp and CKX Lands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKX Lands and US 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 US Energy Corp are associated (or correlated) with CKX Lands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKX Lands has no effect on the direction of US Energy i.e., US Energy and CKX Lands go up and down completely randomly.

Pair Corralation between US Energy and CKX Lands

Given the investment horizon of 90 days US Energy Corp is expected to under-perform the CKX Lands. In addition to that, US Energy is 1.6 times more volatile than CKX Lands. It trades about -0.13 of its total potential returns per unit of risk. CKX Lands is currently generating about 0.13 per unit of volatility. If you would invest  1,190  in CKX Lands on September 24, 2024 and sell it today you would earn a total of  68.00  from holding CKX Lands or generate 5.71% return on investment over 90 days.

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

US Energy Corp  vs.  CKX Lands

US Energy Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Energy Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, US Energy reported solid returns over the last few months and may actually be approaching a breakup point.

CKX Lands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CKX Lands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with US Energy and CKX Lands

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

The idea behind US Energy Corp and CKX Lands 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.