Correlation Between 1st NRG and Parex Resources

Can any of the company-specific risk be diversified away by investing in both 1st NRG and Parex Resources 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 1st NRG and Parex Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st NRG Corp and Parex Resources, you can compare the effects of market volatilities on 1st NRG and Parex Resources 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 1st NRG with a short position of Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st NRG and Parex Resources.

Diversification Opportunities for 1st NRG and Parex Resources

0.0

Correlation Coefficient

1st NRG  Parex Resources

Pay attention - limited upside

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

Pair Corralation between 1st NRG and Parex Resources

If you would invest  931.00  in Parex Resources on December 27, 2024 and sell it today you would earn a total of  37.00  from holding Parex Resources or generate 3.97% return on investment over 90 days.

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

1st NRG Corp  vs.  Parex Resources

1st NRG Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days 1st NRG Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 1st NRG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Parex Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parex Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Parex Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with 1st NRG and Parex Resources

The main advantage of trading using opposite 1st NRG and Parex Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st NRG position performs unexpectedly, Parex Resources 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 Parex Resources will offset losses from the drop in Parex Resources' long position.

The idea behind 1st NRG Corp and Parex Resources 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.