Correlation Between A-Cap Energy and Salazar Resources

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

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

Diversification Opportunities for A-Cap Energy and Salazar Resources

0.46

Correlation Coefficient

A-Cap Energy  Salazar Resources

Very weak diversification

The 3 months correlation between A-Cap and Salazar is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding A Cap Energy Limited and Salazar Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salazar Resources and A-Cap 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 A Cap Energy Limited are associated (or correlated) with Salazar Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salazar Resources has no effect on the direction of A-Cap Energy i.e., A-Cap Energy and Salazar Resources go up and down completely randomly.

Pair Corralation between A-Cap Energy and Salazar Resources

Assuming the 90 days horizon A Cap Energy Limited is expected to generate 2.55 times more return on investment than Salazar Resources. However, A-Cap Energy is 2.55 times more volatile than Salazar Resources Limited. It trades about 0.06 of its potential returns per unit of risk. Salazar Resources Limited is currently generating about 0.03 per unit of risk. If you would invest  6.00  in A Cap Energy Limited on September 4, 2024 and sell it today you would lose (3.40) from holding A Cap Energy Limited or give up 56.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.57%
Values	Daily Returns

A Cap Energy Limited  vs.  Salazar Resources Limited

A Cap Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Salazar Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with A-Cap Energy and Salazar Resources

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

The idea behind A Cap Energy Limited and Salazar Resources 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.