Correlation Between Antero Resources and Alamo Energy

Can any of the company-specific risk be diversified away by investing in both Antero Resources and Alamo 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 Antero Resources and Alamo Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Antero Resources Corp and Alamo Energy Corp, you can compare the effects of market volatilities on Antero Resources and Alamo 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 Antero Resources with a short position of Alamo Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Antero Resources and Alamo Energy.

Diversification Opportunities for Antero Resources and Alamo Energy

-0.69

Correlation Coefficient

Antero Resources  Alamo Energy

Excellent diversification

The 3 months correlation between Antero and Alamo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Antero Resources Corp and Alamo Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Energy Corp and Antero Resources 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 Antero Resources Corp are associated (or correlated) with Alamo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Energy Corp has no effect on the direction of Antero Resources i.e., Antero Resources and Alamo Energy go up and down completely randomly.

Pair Corralation between Antero Resources and Alamo Energy

Allowing for the 90-day total investment horizon Antero Resources is expected to generate 32.09 times less return on investment than Alamo Energy. But when comparing it to its historical volatility, Antero Resources Corp is 37.51 times less risky than Alamo Energy. It trades about 0.09 of its potential returns per unit of risk. Alamo Energy Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Alamo Energy Corp on February 6, 2024 and sell it today you would lose (0.01) from holding Alamo Energy Corp or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Antero Resources Corp  vs.  Alamo Energy Corp

Antero Resources Corp

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Resources Corp are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Antero Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Alamo Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alamo Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Antero Resources and Alamo Energy

The main advantage of trading using opposite Antero Resources and Alamo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Resources position performs unexpectedly, Alamo 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 Alamo Energy will offset losses from the drop in Alamo Energy's long position.

The idea behind Antero Resources Corp and Alamo Energy Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.