Correlation Between Arete Industries and ADX Energy

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

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

Diversification Opportunities for Arete Industries and ADX Energy

0.0

Correlation Coefficient

Arete Industries  ADX Energy

Pay attention - limited upside

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

Pair Corralation between Arete Industries and ADX Energy

Given the investment horizon of 90 days Arete Industries is expected to under-perform the ADX Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Arete Industries is 11.24 times less risky than ADX Energy. The pink sheet trades about -0.01 of its potential returns per unit of risk. The ADX Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.71  in ADX Energy on September 4, 2024 and sell it today you would earn a total of  3.29  from holding ADX Energy or generate 463.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Arete Industries  vs.  ADX Energy

Arete Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arete Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Arete Industries is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ADX Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADX Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, ADX Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arete Industries and ADX Energy

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

The idea behind Arete Industries and ADX 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.