Correlation Between ADX Energy and Pine Cliff

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

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

Diversification Opportunities for ADX Energy and Pine Cliff

0.06

Correlation Coefficient

ADX Energy  Pine Cliff

Significant diversification

The 3 months correlation between ADX and Pine is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ADX Energy and Pine Cliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pine Cliff Energy and ADX 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 ADX Energy are associated (or correlated) with Pine Cliff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pine Cliff Energy has no effect on the direction of ADX Energy i.e., ADX Energy and Pine Cliff go up and down completely randomly.

Pair Corralation between ADX Energy and Pine Cliff

Assuming the 90 days horizon ADX Energy is expected to generate 5.49 times more return on investment than Pine Cliff. However, ADX Energy is 5.49 times more volatile than Pine Cliff Energy. It trades about 0.04 of its potential returns per unit of risk. Pine Cliff Energy is currently generating about -0.05 per unit of risk. If you would invest  10.00  in ADX Energy on August 26, 2024 and sell it today you would lose (6.00) from holding ADX Energy or give up 60.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

ADX Energy  vs.  Pine Cliff Energy

ADX Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADX Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ADX Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pine Cliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pine Cliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pine Cliff is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ADX Energy and Pine Cliff

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

The idea behind ADX Energy and Pine Cliff Energy 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.