Correlation Between Basic Energy and GT Capital

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

By analyzing existing cross correlation between Basic Energy Corp and GT Capital Holdings, you can compare the effects of market volatilities on Basic Energy and GT Capital 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 Basic Energy with a short position of GT Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Energy and GT Capital.

Diversification Opportunities for Basic Energy and GT Capital

0.37

Correlation Coefficient

Basic Energy  GT Capital

Weak diversification

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

Pair Corralation between Basic Energy and GT Capital

Assuming the 90 days trading horizon Basic Energy Corp is expected to under-perform the GT Capital. In addition to that, Basic Energy is 1.43 times more volatile than GT Capital Holdings. It trades about -0.03 of its total potential returns per unit of risk. GT Capital Holdings is currently generating about 0.04 per unit of volatility. If you would invest  53,509  in GT Capital Holdings on October 8, 2024 and sell it today you would earn a total of  10,491  from holding GT Capital Holdings or generate 19.61% return on investment over 90 days.

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

Basic Energy Corp  vs.  GT Capital Holdings

Basic Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Basic Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Basic Energy and GT Capital

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

The idea behind Basic Energy Corp and GT Capital 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.