Correlation Between Beach Energy and Jade Gas

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

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

Diversification Opportunities for Beach Energy and Jade Gas

-0.62

Correlation Coefficient

Beach Energy  Jade Gas

Excellent diversification

The 3 months correlation between Beach and Jade is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and Jade Gas Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jade Gas Holdings 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 Jade Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jade Gas Holdings has no effect on the direction of Beach Energy i.e., Beach Energy and Jade Gas go up and down completely randomly.

Pair Corralation between Beach Energy and Jade Gas

Assuming the 90 days trading horizon Beach Energy is expected to generate 0.58 times more return on investment than Jade Gas. However, Beach Energy is 1.71 times less risky than Jade Gas. It trades about 0.15 of its potential returns per unit of risk. Jade Gas Holdings is currently generating about -0.1 per unit of risk. If you would invest  126.00  in Beach Energy on October 6, 2024 and sell it today you would earn a total of  18.00  from holding Beach Energy or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Beach Energy  vs.  Jade Gas Holdings

Beach Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beach Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Beach Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Jade Gas Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jade Gas Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators 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 Jade Gas

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

The idea behind Beach Energy and Jade Gas Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.