Correlation Between CGX Energy and Buru Energy

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

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

Diversification Opportunities for CGX Energy and Buru Energy

-0.46

Correlation Coefficient

CGX Energy  Buru Energy

Very good diversification

The 3 months correlation between CGX and Buru is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CGX Energy and Buru Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buru Energy Limited and CGX 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 CGX Energy are associated (or correlated) with Buru Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buru Energy Limited has no effect on the direction of CGX Energy i.e., CGX Energy and Buru Energy go up and down completely randomly.

Pair Corralation between CGX Energy and Buru Energy

Assuming the 90 days horizon CGX Energy is expected to generate 5.22 times less return on investment than Buru Energy. But when comparing it to its historical volatility, CGX Energy is 1.67 times less risky than Buru Energy. It trades about 0.02 of its potential returns per unit of risk. Buru Energy Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Buru Energy Limited on December 17, 2024 and sell it today you would earn a total of  0.00  from holding Buru Energy Limited or generate 0.0% return on investment over 90 days.

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

CGX Energy  vs.  Buru Energy Limited

CGX Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CGX Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Buru Energy Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Buru Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Buru Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CGX Energy and Buru Energy

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

The idea behind CGX Energy and Buru Energy Limited 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 Stocks Directory module to find actively traded stocks across global markets.