Correlation Between First Abacus and PXP Energy

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

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

Diversification Opportunities for First Abacus and PXP Energy

-0.22

Correlation Coefficient

First Abacus  PXP Energy

Very good diversification

The 3 months correlation between First and PXP is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding First Abacus Financial and PXP Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PXP Energy Corp and First Abacus 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 First Abacus Financial are associated (or correlated) with PXP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PXP Energy Corp has no effect on the direction of First Abacus i.e., First Abacus and PXP Energy go up and down completely randomly.

Pair Corralation between First Abacus and PXP Energy

Assuming the 90 days trading horizon First Abacus Financial is expected to under-perform the PXP Energy. But the stock apears to be less risky and, when comparing its historical volatility, First Abacus Financial is 1.55 times less risky than PXP Energy. The stock trades about -0.71 of its potential returns per unit of risk. The PXP Energy Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  288.00  in PXP Energy Corp on October 23, 2024 and sell it today you would earn a total of  6.00  from holding PXP Energy Corp or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.41%
Values	Daily Returns

First Abacus Financial  vs.  PXP Energy Corp

First Abacus Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Abacus Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PXP Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PXP Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with First Abacus and PXP Energy

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

The idea behind First Abacus Financial and PXP Energy Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..