Correlation Between Black Dragon and ADX Energy

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

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

Diversification Opportunities for Black Dragon and ADX Energy

0.0

Correlation Coefficient

Black Dragon  ADX Energy

Pay attention - limited upside

The 3 months correlation between Black and ADX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Black Dragon Resource and ADX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX Energy and Black Dragon 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 Black Dragon Resource 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 Black Dragon i.e., Black Dragon and ADX Energy go up and down completely randomly.

Pair Corralation between Black Dragon and ADX Energy

Given the investment horizon of 90 days Black Dragon Resource is expected to generate 3.61 times more return on investment than ADX Energy. However, Black Dragon is 3.61 times more volatile than ADX Energy. It trades about 0.14 of its potential returns per unit of risk. ADX Energy is currently generating about 0.06 per unit of risk. If you would invest  0.00  in Black Dragon Resource on October 25, 2024 and sell it today you would earn a total of  0.01  from holding Black Dragon Resource or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Black Dragon Resource  vs.  ADX Energy

Black Dragon Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Dragon Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Black Dragon is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ADX Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADX Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ADX Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Black Dragon and ADX Energy

The main advantage of trading using opposite Black Dragon and ADX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Dragon 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 Black Dragon Resource 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.