Correlation Between Beach Energy and Rubicon Water

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

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

Diversification Opportunities for Beach Energy and Rubicon Water

-0.07

Correlation Coefficient

Beach Energy  Rubicon Water

Good diversification

The 3 months correlation between Beach and Rubicon is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and Rubicon Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Water 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 Rubicon Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Water has no effect on the direction of Beach Energy i.e., Beach Energy and Rubicon Water go up and down completely randomly.

Pair Corralation between Beach Energy and Rubicon Water

Assuming the 90 days trading horizon Beach Energy is expected to generate 0.78 times more return on investment than Rubicon Water. However, Beach Energy is 1.29 times less risky than Rubicon Water. It trades about 0.15 of its potential returns per unit of risk. Rubicon Water is currently generating about -0.3 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	Insignificant
Accuracy	97.62%
Values	Daily Returns

Beach Energy  vs.  Rubicon Water

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.

Rubicon Water

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Water are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Rubicon Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beach Energy and Rubicon Water

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

The idea behind Beach Energy and Rubicon Water 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.