Correlation Between Alligator Energy and Baselode Energy

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

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

Diversification Opportunities for Alligator Energy and Baselode Energy

0.79

Correlation Coefficient

Alligator Energy  Baselode Energy

Poor diversification

The 3 months correlation between Alligator and Baselode is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alligator Energy Limited and Baselode Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baselode Energy Corp and Alligator 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 Alligator Energy Limited are associated (or correlated) with Baselode Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baselode Energy Corp has no effect on the direction of Alligator Energy i.e., Alligator Energy and Baselode Energy go up and down completely randomly.

Pair Corralation between Alligator Energy and Baselode Energy

Assuming the 90 days horizon Alligator Energy Limited is expected to generate 2.85 times more return on investment than Baselode Energy. However, Alligator Energy is 2.85 times more volatile than Baselode Energy Corp. It trades about 0.07 of its potential returns per unit of risk. Baselode Energy Corp is currently generating about -0.03 per unit of risk. If you would invest  3.20  in Alligator Energy Limited on October 10, 2024 and sell it today you would lose (0.84) from holding Alligator Energy Limited or give up 26.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Alligator Energy Limited  vs.  Baselode Energy Corp

Alligator Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alligator Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Alligator Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Baselode Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baselode Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Alligator Energy and Baselode Energy

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

The idea behind Alligator Energy Limited and Baselode 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.