Correlation Between AER Energy and Buru Energy

Can any of the company-specific risk be diversified away by investing in both AER Energy and Buru 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 Buru 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 Buru Energy Limited, you can compare the effects of market volatilities on AER Energy and Buru 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 Buru Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AER Energy and Buru Energy.

Diversification Opportunities for AER Energy and Buru Energy

0.0

Correlation Coefficient

AER Energy  Buru Energy

Pay attention - limited upside

The 3 months correlation between AER and Buru is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AER Energy Resources and Buru Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buru Energy Limited 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 Buru Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buru Energy Limited has no effect on the direction of AER Energy i.e., AER Energy and Buru Energy go up and down completely randomly.

Pair Corralation between AER Energy and Buru Energy

If you would invest  3.00  in Buru Energy Limited on December 27, 2024 and sell it today you would lose (1.00) from holding Buru Energy Limited or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

AER Energy Resources  vs.  Buru Energy Limited

AER Energy Resources

Risk-Adjusted Performance

OK

Over the last 90 days AER Energy Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AER Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Buru Energy Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with AER Energy and Buru Energy

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

The idea behind AER Energy Resources and Buru Energy Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.