Correlation Between AER Energy and Alamo Energy

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

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

Diversification Opportunities for AER Energy and Alamo Energy

0.0

Correlation Coefficient

AER Energy  Alamo Energy

Pay attention - limited upside

The 3 months correlation between AER and Alamo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AER Energy Resources 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 AER 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 AER Energy Resources 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 AER Energy i.e., AER Energy and Alamo Energy go up and down completely randomly.

Pair Corralation between AER Energy and Alamo Energy

If you would invest  0.00  in AER Energy Resources on December 27, 2024 and sell it today you would earn a total of  0.00  from holding AER Energy Resources or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

AER Energy Resources  vs.  Alamo Energy Corp

AER Energy Resources

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AER Energy Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, AER Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Alamo Energy Corp

Risk-Adjusted Performance

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 rather sound primary indicators, Alamo Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AER Energy and Alamo Energy

The main advantage of trading using opposite AER Energy and Alamo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AER Energy 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 AER Energy Resources 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.