Correlation Between Berkeley Energy and Meso Numismatics

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

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

Diversification Opportunities for Berkeley Energy and Meso Numismatics

-0.39

Correlation Coefficient

Berkeley Energy  Meso Numismatics

Very good diversification

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

Pair Corralation between Berkeley Energy and Meso Numismatics

Assuming the 90 days horizon Berkeley Energy is expected to generate 17.59 times less return on investment than Meso Numismatics. But when comparing it to its historical volatility, Berkeley Energy is 4.8 times less risky than Meso Numismatics. It trades about 0.02 of its potential returns per unit of risk. Meso Numismatics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Meso Numismatics on October 15, 2024 and sell it today you would lose (0.40) from holding Meso Numismatics or give up 16.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.95%
Values	Daily Returns

Berkeley Energy  vs.  Meso Numismatics

Berkeley Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berkeley Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Meso Numismatics

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with Berkeley Energy and Meso Numismatics

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

The idea behind Berkeley Energy and Meso Numismatics 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.