Correlation Between Allhome Corp and Basic Energy

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

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

Diversification Opportunities for Allhome Corp and Basic Energy

0.14

Correlation Coefficient

Allhome Corp  Basic Energy

Average diversification

The 3 months correlation between Allhome and Basic is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Allhome Corp and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp and Allhome Corp 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 Allhome Corp are associated (or correlated) with Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of Allhome Corp i.e., Allhome Corp and Basic Energy go up and down completely randomly.

Pair Corralation between Allhome Corp and Basic Energy

Assuming the 90 days trading horizon Allhome Corp is expected to generate 0.64 times more return on investment than Basic Energy. However, Allhome Corp is 1.57 times less risky than Basic Energy. It trades about 0.06 of its potential returns per unit of risk. Basic Energy Corp is currently generating about -0.13 per unit of risk. If you would invest  63.00  in Allhome Corp on October 8, 2024 and sell it today you would earn a total of  1.00  from holding Allhome Corp or generate 1.59% return on investment over 90 days.

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

Allhome Corp  vs.  Basic Energy Corp

Allhome Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allhome Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Basic Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Allhome Corp and Basic Energy

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

The idea behind Allhome Corp and Basic 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.