Correlation Between Alpha Energy and New Frontier

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

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

Diversification Opportunities for Alpha Energy and New Frontier

0.0

Correlation Coefficient

Alpha Energy  New Frontier

Pay attention - limited upside

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

Pair Corralation between Alpha Energy and New Frontier

Given the investment horizon of 90 days Alpha Energy is expected to under-perform the New Frontier. In addition to that, Alpha Energy is 1.19 times more volatile than New Frontier Energy. It trades about -0.06 of its total potential returns per unit of risk. New Frontier Energy is currently generating about -0.05 per unit of volatility. If you would invest  0.61  in New Frontier Energy on October 26, 2024 and sell it today you would lose (0.60) from holding New Frontier Energy or give up 98.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	23.34%
Values	Daily Returns

Alpha Energy  vs.  New Frontier Energy

Alpha Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Alpha Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

New Frontier Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Frontier Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, New Frontier is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alpha Energy and New Frontier

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

The idea behind Alpha Energy and New Frontier 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.