Correlation Between AXP Energy and Eco (Atlantic)

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

By analyzing existing cross correlation between AXP Energy and Eco Oil Gas, you can compare the effects of market volatilities on AXP Energy and Eco (Atlantic) 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 AXP Energy with a short position of Eco (Atlantic). Check out your portfolio center. Please also check ongoing floating volatility patterns of AXP Energy and Eco (Atlantic).

Diversification Opportunities for AXP Energy and Eco (Atlantic)

-0.49

Correlation Coefficient

AXP Energy  Eco (Atlantic)

Very good diversification

The 3 months correlation between AXP and Eco is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding AXP Energy and Eco Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco (Atlantic) and AXP 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 AXP Energy are associated (or correlated) with Eco (Atlantic). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco (Atlantic) has no effect on the direction of AXP Energy i.e., AXP Energy and Eco (Atlantic) go up and down completely randomly.

Pair Corralation between AXP Energy and Eco (Atlantic)

Assuming the 90 days horizon AXP Energy is expected to generate 1.97 times more return on investment than Eco (Atlantic). However, AXP Energy is 1.97 times more volatile than Eco Oil Gas. It trades about 0.09 of its potential returns per unit of risk. Eco Oil Gas is currently generating about -0.02 per unit of risk. If you would invest  0.07  in AXP Energy on September 3, 2024 and sell it today you would earn a total of  0.01  from holding AXP Energy or generate 14.29% return on investment over 90 days.

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

AXP Energy  vs.  Eco Oil Gas

AXP Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXP Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AXP Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Eco (Atlantic)

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AXP Energy and Eco (Atlantic)

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

The idea behind AXP Energy and Eco Oil Gas 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.