Correlation Between Alvopetro Energy and Journey Energy

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

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

Diversification Opportunities for Alvopetro Energy and Journey Energy

0.58

Correlation Coefficient

Alvopetro Energy  Journey Energy

Very weak diversification

The 3 months correlation between Alvopetro and Journey is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alvopetro Energy and Journey Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Journey Energy and Alvopetro 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 Alvopetro Energy are associated (or correlated) with Journey Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Journey Energy has no effect on the direction of Alvopetro Energy i.e., Alvopetro Energy and Journey Energy go up and down completely randomly.

Pair Corralation between Alvopetro Energy and Journey Energy

Assuming the 90 days horizon Alvopetro Energy is expected to generate 0.68 times more return on investment than Journey Energy. However, Alvopetro Energy is 1.46 times less risky than Journey Energy. It trades about 0.02 of its potential returns per unit of risk. Journey Energy is currently generating about -0.11 per unit of risk. If you would invest  496.00  in Alvopetro Energy on September 16, 2024 and sell it today you would earn a total of  8.00  from holding Alvopetro Energy or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alvopetro Energy  vs.  Journey Energy

Alvopetro Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alvopetro Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Alvopetro Energy is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Journey Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Journey Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alvopetro Energy and Journey Energy

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

The idea behind Alvopetro Energy and Journey Energy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.