Correlation Between Azure Holding and California Resources

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

By analyzing existing cross correlation between Azure Holding Group and California Resources, you can compare the effects of market volatilities on Azure Holding and California 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 Azure Holding with a short position of California Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azure Holding and California Resources.

Diversification Opportunities for Azure Holding and California Resources

-0.39

Correlation Coefficient

Azure Holding  California Resources

Very good diversification

The 3 months correlation between Azure and California is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Azure Holding Group and California Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources and Azure Holding 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 Azure Holding Group are associated (or correlated) with California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources has no effect on the direction of Azure Holding i.e., Azure Holding and California Resources go up and down completely randomly.

Pair Corralation between Azure Holding and California Resources

Given the investment horizon of 90 days Azure Holding Group is expected to generate 11.17 times more return on investment than California Resources. However, Azure Holding is 11.17 times more volatile than California Resources. It trades about 0.09 of its potential returns per unit of risk. California Resources is currently generating about 0.04 per unit of risk. If you would invest  0.01  in Azure Holding Group on October 11, 2024 and sell it today you would earn a total of  7.99  from holding Azure Holding Group or generate 79900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.72%
Values	Daily Returns

Azure Holding Group  vs.  California Resources

Azure Holding Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azure Holding Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Azure Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

California Resources

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days California Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile basic indicators, California Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azure Holding and California Resources

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

The idea behind Azure Holding Group and California Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.