Correlation Between Beach Energy and Arkanova Energy

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

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

Diversification Opportunities for Beach Energy and Arkanova Energy

1.0

Correlation Coefficient

Beach Energy  Arkanova Energy

No risk reduction

The 3 months correlation between Beach and Arkanova is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and Arkanova Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkanova Energy and Beach 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 Beach Energy are associated (or correlated) with Arkanova Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkanova Energy has no effect on the direction of Beach Energy i.e., Beach Energy and Arkanova Energy go up and down completely randomly.

Pair Corralation between Beach Energy and Arkanova Energy

If you would invest  0.01  in Arkanova Energy on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Arkanova Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Beach Energy  vs.  Arkanova Energy

Beach Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beach Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Beach Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arkanova Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arkanova Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Arkanova Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beach Energy and Arkanova Energy

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

The idea behind Beach Energy and Arkanova 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..