Correlation Between Beach Energy and Brookside Energy

Can any of the company-specific risk be diversified away by investing in both Beach Energy and Brookside 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 Brookside 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 Brookside Energy, you can compare the effects of market volatilities on Beach Energy and Brookside 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 Brookside Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beach Energy and Brookside Energy.

Diversification Opportunities for Beach Energy and Brookside Energy

-0.28

Correlation Coefficient

Beach Energy  Brookside Energy

Very good diversification

The 3 months correlation between Beach and Brookside is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and Brookside Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookside 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 Brookside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookside Energy has no effect on the direction of Beach Energy i.e., Beach Energy and Brookside Energy go up and down completely randomly.

Pair Corralation between Beach Energy and Brookside Energy

Assuming the 90 days trading horizon Beach Energy is expected to generate 1.43 times less return on investment than Brookside Energy. But when comparing it to its historical volatility, Beach Energy is 1.8 times less risky than Brookside Energy. It trades about 0.3 of its potential returns per unit of risk. Brookside Energy is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Brookside Energy on October 13, 2024 and sell it today you would earn a total of  5.00  from holding Brookside Energy or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Beach Energy  vs.  Brookside Energy

Beach Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beach Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Beach Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Brookside Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookside Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Beach Energy and Brookside Energy

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

The idea behind Beach Energy and Brookside 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.