Correlation Between Alerian Energy and REX AI

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

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

Diversification Opportunities for Alerian Energy and REX AI

0.82

Correlation Coefficient

Alerian Energy  REX AI

Very poor diversification

The 3 months correlation between Alerian and REX is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alerian Energy Infrastructure and REX AI Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX AI Equity and Alerian 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 Alerian Energy Infrastructure are associated (or correlated) with REX AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX AI Equity has no effect on the direction of Alerian Energy i.e., Alerian Energy and REX AI go up and down completely randomly.

Pair Corralation between Alerian Energy and REX AI

Given the investment horizon of 90 days Alerian Energy is expected to generate 1.21 times less return on investment than REX AI. In addition to that, Alerian Energy is 1.1 times more volatile than REX AI Equity. It trades about 0.14 of its total potential returns per unit of risk. REX AI Equity is currently generating about 0.18 per unit of volatility. If you would invest  4,479  in REX AI Equity on October 1, 2024 and sell it today you would earn a total of  509.00  from holding REX AI Equity or generate 11.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Alerian Energy Infrastructure  vs.  REX AI Equity

Alerian Energy Infra

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alerian Energy Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Alerian Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

REX AI Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REX AI Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, REX AI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alerian Energy and REX AI

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

The idea behind Alerian Energy Infrastructure and REX AI Equity 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.