Correlation Between Blue Sky and Peninsula Energy

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

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

Diversification Opportunities for Blue Sky and Peninsula Energy

0.83

Correlation Coefficient

Blue Sky  Peninsula Energy

Very poor diversification

The 3 months correlation between Blue and Peninsula is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sky Uranium and Peninsula Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy and Blue Sky 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 Blue Sky Uranium are associated (or correlated) with Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Blue Sky i.e., Blue Sky and Peninsula Energy go up and down completely randomly.

Pair Corralation between Blue Sky and Peninsula Energy

Assuming the 90 days horizon Blue Sky Uranium is expected to generate 1.37 times more return on investment than Peninsula Energy. However, Blue Sky is 1.37 times more volatile than Peninsula Energy. It trades about 0.01 of its potential returns per unit of risk. Peninsula Energy is currently generating about -0.08 per unit of risk. If you would invest  5.07  in Blue Sky Uranium on December 20, 2024 and sell it today you would lose (0.97) from holding Blue Sky Uranium or give up 19.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Blue Sky Uranium  vs.  Peninsula Energy

Blue Sky Uranium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blue Sky Uranium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Blue Sky is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Peninsula Energy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Blue Sky and Peninsula Energy

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

The idea behind Blue Sky Uranium and Peninsula 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.