Correlation Between AER Energy and ADX Energy
Can any of the company-specific risk be diversified away by investing in both AER Energy and ADX 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 AER Energy and ADX Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AER Energy Resources and ADX Energy, you can compare the effects of market volatilities on AER Energy and ADX 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 AER Energy with a short position of ADX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AER Energy and ADX Energy.
Diversification Opportunities for AER Energy and ADX Energy
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AER and ADX is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding AER Energy Resources and ADX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX Energy and AER 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 AER Energy Resources are associated (or correlated) with ADX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX Energy has no effect on the direction of AER Energy i.e., AER Energy and ADX Energy go up and down completely randomly.
Pair Corralation between AER Energy and ADX Energy
Given the investment horizon of 90 days AER Energy Resources is expected to generate 1.51 times more return on investment than ADX Energy. However, AER Energy is 1.51 times more volatile than ADX Energy. It trades about 0.06 of its potential returns per unit of risk. ADX Energy is currently generating about 0.06 per unit of risk. If you would invest 0.00 in AER Energy Resources on August 28, 2024 and sell it today you would earn a total of 0.01 from holding AER Energy Resources or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.95% |
| Values | Daily Returns |
AER Energy Resources vs. ADX Energy
Performance |
| Timeline |
| AER Energy Resources |
| ADX Energy |
AER Energy and ADX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AER Energy and ADX Energy
The main advantage of trading using opposite AER Energy and ADX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AER Energy position performs unexpectedly, ADX 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 ADX Energy will offset losses from the drop in ADX Energy's long position.| AER Energy vs. Caduceus Software Systems | AER Energy vs. North Springs Resources | AER Energy vs. Nyxio Tech Corp | AER Energy vs. Access Power Co |
| ADX Energy vs. Permian Resources | ADX Energy vs. Devon Energy | ADX Energy vs. EOG Resources | ADX Energy vs. Coterra Energy |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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