Correlation Between I3 Energy and Battalion Oil

Can any of the company-specific risk be diversified away by investing in both I3 Energy and Battalion Oil 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 I3 Energy and Battalion Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between I3 Energy Plc and Battalion Oil Corp, you can compare the effects of market volatilities on I3 Energy and Battalion Oil 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 I3 Energy with a short position of Battalion Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of I3 Energy and Battalion Oil.

Diversification Opportunities for I3 Energy and Battalion Oil

-0.5

Correlation Coefficient

I3 Energy  Battalion Oil

Very good diversification

The 3 months correlation between ITEEF and Battalion is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding I3 Energy Plc and Battalion Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battalion Oil Corp and I3 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 I3 Energy Plc are associated (or correlated) with Battalion Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battalion Oil Corp has no effect on the direction of I3 Energy i.e., I3 Energy and Battalion Oil go up and down completely randomly.

Pair Corralation between I3 Energy and Battalion Oil

Assuming the 90 days horizon I3 Energy Plc is expected to generate 0.65 times more return on investment than Battalion Oil. However, I3 Energy Plc is 1.53 times less risky than Battalion Oil. It trades about 0.05 of its potential returns per unit of risk. Battalion Oil Corp is currently generating about -0.01 per unit of risk. If you would invest  11.00  in I3 Energy Plc on October 2, 2024 and sell it today you would earn a total of  3.00  from holding I3 Energy Plc or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.41%
Values	Daily Returns

I3 Energy Plc  vs.  Battalion Oil Corp

I3 Energy Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days I3 Energy Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Battalion Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Battalion Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with I3 Energy and Battalion Oil

The main advantage of trading using opposite I3 Energy and Battalion Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if I3 Energy position performs unexpectedly, Battalion Oil 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 Battalion Oil will offset losses from the drop in Battalion Oil's long position.

The idea behind I3 Energy Plc and Battalion Oil 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.