Correlation Between Apex Mining and Basic Energy

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

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

Diversification Opportunities for Apex Mining and Basic Energy

0.31

Correlation Coefficient

Apex Mining  Basic Energy

Weak diversification

The 3 months correlation between Apex and Basic is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Apex Mining Co and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp and Apex Mining 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 Apex Mining Co are associated (or correlated) with Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of Apex Mining i.e., Apex Mining and Basic Energy go up and down completely randomly.

Pair Corralation between Apex Mining and Basic Energy

Assuming the 90 days trading horizon Apex Mining Co is expected to generate 0.72 times more return on investment than Basic Energy. However, Apex Mining Co is 1.38 times less risky than Basic Energy. It trades about 0.08 of its potential returns per unit of risk. Basic Energy Corp is currently generating about -0.04 per unit of risk. If you would invest  278.00  in Apex Mining Co on October 24, 2024 and sell it today you would earn a total of  121.00  from holding Apex Mining Co or generate 43.53% return on investment over 90 days.

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

Apex Mining Co  vs.  Basic Energy Corp

Apex Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Basic Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Apex Mining and Basic Energy

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

The idea behind Apex Mining Co and Basic 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.