Correlation Between Rockdale Resources and ADX Energy

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

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

Diversification Opportunities for Rockdale Resources and ADX Energy

0.45

Correlation Coefficient

Rockdale Resources  ADX Energy

Very weak diversification

The 3 months correlation between Rockdale and ADX is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Rockdale Resources Corp and ADX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX Energy and Rockdale Resources 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 Rockdale Resources Corp 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 Rockdale Resources i.e., Rockdale Resources and ADX Energy go up and down completely randomly.

Pair Corralation between Rockdale Resources and ADX Energy

Given the investment horizon of 90 days Rockdale Resources Corp is expected to under-perform the ADX Energy. In addition to that, Rockdale Resources is 1.16 times more volatile than ADX Energy. It trades about -0.17 of its total potential returns per unit of risk. ADX Energy is currently generating about 0.01 per unit of volatility. If you would invest  7.50  in ADX Energy on September 4, 2024 and sell it today you would lose (3.50) from holding ADX Energy or give up 46.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	54.69%
Values	Daily Returns

Rockdale Resources Corp  vs.  ADX Energy

Rockdale Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockdale Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm 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 Rockdale Resources and ADX Energy

The main advantage of trading using opposite Rockdale Resources and ADX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockdale Resources 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 Rockdale Resources Corp 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.