Correlation Between Buru Energy and ADX Energy
Can any of the company-specific risk be diversified away by investing in both Buru 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 Buru 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 Buru Energy Limited and ADX Energy, you can compare the effects of market volatilities on Buru 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 Buru Energy with a short position of ADX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buru Energy and ADX Energy.
Diversification Opportunities for Buru Energy and ADX Energy
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Buru and ADX is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Buru Energy Limited and ADX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX Energy and Buru 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 Buru Energy Limited 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 Buru Energy i.e., Buru Energy and ADX Energy go up and down completely randomly.
Pair Corralation between Buru Energy and ADX Energy
Assuming the 90 days horizon Buru Energy is expected to generate 11.62 times less return on investment than ADX Energy. But when comparing it to its historical volatility, Buru Energy Limited is 5.05 times less risky than ADX Energy. It trades about 0.02 of its potential returns per unit of risk. ADX Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.61 in ADX Energy on August 28, 2024 and sell it today you would earn a total of 3.39 from holding ADX Energy or generate 555.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.95% |
| Values | Daily Returns |
Buru Energy Limited vs. ADX Energy
Performance |
| Timeline |
| Buru Energy Limited |
| ADX Energy |
Buru Energy and ADX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Buru Energy and ADX Energy
The main advantage of trading using opposite Buru Energy and ADX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buru 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.| Buru Energy vs. Permian Resources | Buru Energy vs. Devon Energy | Buru Energy vs. EOG Resources | Buru Energy vs. Coterra Energy |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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