Correlation Between Calima Energy and Royal Helium

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

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

Diversification Opportunities for Calima Energy and Royal Helium

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Correlation Coefficient

Calima Energy  Royal Helium

Pay attention - limited upside

The 3 months correlation between Calima and Royal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Calima Energy Limited and Royal Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Helium and Calima 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 Calima Energy Limited are associated (or correlated) with Royal Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Helium has no effect on the direction of Calima Energy i.e., Calima Energy and Royal Helium go up and down completely randomly.

Pair Corralation between Calima Energy and Royal Helium

Assuming the 90 days horizon Calima Energy Limited is expected to generate 7.41 times more return on investment than Royal Helium. However, Calima Energy is 7.41 times more volatile than Royal Helium. It trades about 0.05 of its potential returns per unit of risk. Royal Helium is currently generating about -0.06 per unit of risk. If you would invest  9.45  in Calima Energy Limited on October 26, 2024 and sell it today you would lose (8.20) from holding Calima Energy Limited or give up 86.77% of portfolio value over 90 days.

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

Calima Energy Limited  vs.  Royal Helium

Calima Energy Limited

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Calima Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Calima Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Royal Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Helium 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 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.

Pair Trading with Calima Energy and Royal Helium

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

The idea behind Calima Energy Limited and Royal Helium 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.