Correlation Between Arrow Exploration and Buru Energy

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

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

Diversification Opportunities for Arrow Exploration and Buru Energy

0.07

Correlation Coefficient

Arrow Exploration  Buru Energy

Significant diversification

The 3 months correlation between Arrow and Buru is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Exploration Corp 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 Arrow Exploration 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 Arrow Exploration Corp 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 Arrow Exploration i.e., Arrow Exploration and Buru Energy go up and down completely randomly.

Pair Corralation between Arrow Exploration and Buru Energy

Assuming the 90 days horizon Arrow Exploration Corp is expected to generate 0.35 times more return on investment than Buru Energy. However, Arrow Exploration Corp is 2.88 times less risky than Buru Energy. It trades about -0.06 of its potential returns per unit of risk. Buru Energy Limited is currently generating about -0.21 per unit of risk. If you would invest  25.00  in Arrow Exploration Corp on December 27, 2024 and sell it today you would lose (1.00) from holding Arrow Exploration Corp or give up 4.0% of portfolio value over 90 days.

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

Arrow Exploration Corp  vs.  Buru Energy Limited

Arrow Exploration Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arrow Exploration Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Buru Energy Limited

Risk-Adjusted Performance

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 nearly stable technical and fundamental indicators, Buru Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arrow Exploration and Buru Energy

The main advantage of trading using opposite Arrow Exploration and Buru Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Exploration 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 Arrow Exploration Corp 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.