Correlation Between Aminex PLC and Reserve Petroleum

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

By analyzing existing cross correlation between Aminex PLC and The Reserve Petroleum, you can compare the effects of market volatilities on Aminex PLC and Reserve Petroleum 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 Aminex PLC with a short position of Reserve Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aminex PLC and Reserve Petroleum.

Diversification Opportunities for Aminex PLC and Reserve Petroleum

0.27

Correlation Coefficient

Aminex PLC  Reserve Petroleum

Modest diversification

The 3 months correlation between Aminex and Reserve is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Aminex PLC and The Reserve Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reserve Petroleum and Aminex PLC 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 Aminex PLC are associated (or correlated) with Reserve Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reserve Petroleum has no effect on the direction of Aminex PLC i.e., Aminex PLC and Reserve Petroleum go up and down completely randomly.

Pair Corralation between Aminex PLC and Reserve Petroleum

Assuming the 90 days horizon Aminex PLC is expected to under-perform the Reserve Petroleum. In addition to that, Aminex PLC is 20.35 times more volatile than The Reserve Petroleum. It trades about -0.26 of its total potential returns per unit of risk. The Reserve Petroleum is currently generating about -0.38 per unit of volatility. If you would invest  17,700  in The Reserve Petroleum on December 2, 2024 and sell it today you would lose (600.00) from holding The Reserve Petroleum or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Aminex PLC  vs.  The Reserve Petroleum

Aminex PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aminex PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aminex PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Reserve Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Reserve Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Reserve Petroleum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Aminex PLC and Reserve Petroleum

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

The idea behind Aminex PLC and The Reserve Petroleum 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.