Correlation Between US Energy and Barnwell Industries
Can any of the company-specific risk be diversified away by investing in both US Energy and Barnwell Industries 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 Barnwell Industries 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 Barnwell Industries, you can compare the effects of market volatilities on US Energy and Barnwell Industries 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 Barnwell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Energy and Barnwell Industries.
Diversification Opportunities for US Energy and Barnwell Industries
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between USEG and Barnwell is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp and Barnwell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnwell Industries 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 Barnwell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnwell Industries has no effect on the direction of US Energy i.e., US Energy and Barnwell Industries go up and down completely randomly.
Pair Corralation between US Energy and Barnwell Industries
Given the investment horizon of 90 days US Energy Corp is expected to generate 3.32 times more return on investment than Barnwell Industries. However, US Energy is 3.32 times more volatile than Barnwell Industries. It trades about 0.15 of its potential returns per unit of risk. Barnwell Industries is currently generating about 0.2 per unit of risk. 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 |
US Energy Corp vs. Barnwell Industries
Performance |
| Timeline |
| US Energy Corp |
| Barnwell Industries |
US Energy and Barnwell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Energy and Barnwell Industries
The main advantage of trading using opposite US Energy and Barnwell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Energy position performs unexpectedly, Barnwell Industries 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 Barnwell Industries will offset losses from the drop in Barnwell Industries' long position.| US Energy vs. PEDEVCO Corp | US Energy vs. Houston American Energy | US Energy vs. PHX Minerals | US Energy vs. Trio Petroleum Corp |
| Barnwell Industries vs. Houston American Energy | Barnwell Industries vs. Mexco Energy | Barnwell Industries vs. PHX Minerals | Barnwell Industries vs. Ring 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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