Correlation Between ACDC Metals and 88 Energy

Can any of the company-specific risk be diversified away by investing in both ACDC Metals and 88 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 ACDC Metals and 88 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ACDC Metals and 88 Energy, you can compare the effects of market volatilities on ACDC Metals and 88 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 ACDC Metals with a short position of 88 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACDC Metals and 88 Energy.

Diversification Opportunities for ACDC Metals and 88 Energy

0.3

Correlation Coefficient

ACDC Metals  88 Energy

Weak diversification

The 3 months correlation between ACDC and 88E is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ACDC Metals and 88 Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 88 Energy and ACDC Metals 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 ACDC Metals are associated (or correlated) with 88 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 88 Energy has no effect on the direction of ACDC Metals i.e., ACDC Metals and 88 Energy go up and down completely randomly.

Pair Corralation between ACDC Metals and 88 Energy

Assuming the 90 days trading horizon ACDC Metals is expected to under-perform the 88 Energy. But the stock apears to be less risky and, when comparing its historical volatility, ACDC Metals is 3.89 times less risky than 88 Energy. The stock trades about -0.02 of its potential returns per unit of risk. The 88 Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.18  in 88 Energy on October 25, 2024 and sell it today you would lose (0.98) from holding 88 Energy or give up 83.05% of portfolio value over 90 days.

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

ACDC Metals  vs.  88 Energy

ACDC Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACDC Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

88 Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 88 Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, 88 Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACDC Metals and 88 Energy

The main advantage of trading using opposite ACDC Metals and 88 Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACDC Metals position performs unexpectedly, 88 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 88 Energy will offset losses from the drop in 88 Energy's long position.

The idea behind ACDC Metals and 88 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.