Correlation Between AER Energy and Calima Energy
Can any of the company-specific risk be diversified away by investing in both AER Energy and Calima 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 Calima 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 Calima Energy Limited, you can compare the effects of market volatilities on AER Energy and Calima 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 Calima Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AER Energy and Calima Energy.
Diversification Opportunities for AER Energy and Calima Energy
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between AER and Calima is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding AER Energy Resources and Calima Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calima Energy Limited 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 Calima Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calima Energy Limited has no effect on the direction of AER Energy i.e., AER Energy and Calima Energy go up and down completely randomly.
Pair Corralation between AER Energy and Calima Energy
Given the investment horizon of 90 days AER Energy is expected to generate 1.22 times less return on investment than Calima Energy. But when comparing it to its historical volatility, AER Energy Resources is 1.03 times less risky than Calima Energy. It trades about 0.05 of its potential returns per unit of risk. Calima Energy Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5.09 in Calima Energy Limited on August 31, 2024 and sell it today you would lose (3.84) from holding Calima Energy Limited or give up 75.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
AER Energy Resources vs. Calima Energy Limited
Performance |
| Timeline |
| AER Energy Resources |
| Calima Energy Limited |
AER Energy and Calima Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AER Energy and Calima Energy
The main advantage of trading using opposite AER Energy and Calima Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AER Energy position performs unexpectedly, Calima 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 Calima Energy will offset losses from the drop in Calima 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 |
| Calima Energy vs. Permian Resources | Calima Energy vs. Devon Energy | Calima Energy vs. EOG Resources | Calima 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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