Correlation Between AER Energy and Calima Energy

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

Diversification Opportunities for AER Energy and Calima Energy

0.0

Correlation Coefficient

AER Energy  Calima Energy

Pay attention - limited upside

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

Pair Corralation between AER Energy and Calima 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	93.75%
Values	Daily Returns

AER Energy Resources  vs.  Calima Energy Limited

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.

Calima Energy Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calima Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Calima 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 Calima Energy

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

The idea behind AER Energy Resources and Calima 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.