Correlation Between Buru Energy and Eco Oil

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

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

Diversification Opportunities for Buru Energy and Eco Oil

-0.37

Correlation Coefficient

Buru Energy  Eco Oil

Very good diversification

The 3 months correlation between Buru and Eco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Buru Energy Limited and Eco Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Oil Gas and Buru 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 Buru Energy Limited are associated (or correlated) with Eco Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Oil Gas has no effect on the direction of Buru Energy i.e., Buru Energy and Eco Oil go up and down completely randomly.

Pair Corralation between Buru Energy and Eco Oil

Assuming the 90 days horizon Buru Energy is expected to generate 1.18 times less return on investment than Eco Oil. In addition to that, Buru Energy is 1.82 times more volatile than Eco Oil Gas. It trades about 0.02 of its total potential returns per unit of risk. Eco Oil Gas is currently generating about 0.04 per unit of volatility. If you would invest  14.00  in Eco Oil Gas on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Eco Oil Gas or generate 0.0% return on investment over 90 days.

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

Buru Energy Limited  vs.  Eco Oil Gas

Buru Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buru Energy Limited 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 technical and fundamental 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.

Eco Oil Gas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Oil Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eco Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Buru Energy and Eco Oil

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

The idea behind Buru Energy Limited and Eco Oil Gas 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.