Correlation Between Barnwell Industries and US Energy
Can any of the company-specific risk be diversified away by investing in both Barnwell Industries and US 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 Barnwell Industries and US Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnwell Industries and US Energy Corp, you can compare the effects of market volatilities on Barnwell Industries and US 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 Barnwell Industries with a short position of US Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnwell Industries and US Energy.
Diversification Opportunities for Barnwell Industries and US Energy
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Barnwell and USEG is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries and US Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Energy Corp and Barnwell Industries 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 Barnwell Industries are associated (or correlated) with US Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Energy Corp has no effect on the direction of Barnwell Industries i.e., Barnwell Industries and US Energy go up and down completely randomly.
Pair Corralation between Barnwell Industries and US Energy
Considering the 90-day investment horizon Barnwell Industries is expected to generate 2.46 times less return on investment than US Energy. But when comparing it to its historical volatility, Barnwell Industries is 3.32 times less risky than US Energy. It trades about 0.2 of its potential returns per unit of risk. US Energy Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 165.00 in US Energy Corp on November 4, 2024 and sell it today you would earn a total of 54.00 from holding US Energy Corp or generate 32.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barnwell Industries vs. US Energy Corp
Performance |
| Timeline |
| Barnwell Industries |
| US Energy Corp |
Barnwell Industries and US Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnwell Industries and US Energy
The main advantage of trading using opposite Barnwell Industries and US Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnwell Industries position performs unexpectedly, US 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 US Energy will offset losses from the drop in US Energy's long position.| Barnwell Industries vs. Houston American Energy | Barnwell Industries vs. Mexco Energy | Barnwell Industries vs. PHX Minerals | Barnwell Industries vs. Ring Energy |
| US Energy vs. PEDEVCO Corp | US Energy vs. Houston American Energy | US Energy vs. PHX Minerals | US Energy vs. Trio Petroleum Corp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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