Correlation Between New Zealand and Beach Energy

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

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

Diversification Opportunities for New Zealand and Beach Energy

0.0

Correlation Coefficient

New Zealand  Beach Energy

Pay attention - limited upside

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

Pair Corralation between New Zealand and Beach Energy

If you would invest  130.00  in Beach Energy on October 22, 2024 and sell it today you would earn a total of  20.00  from holding Beach Energy or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.25%
Values	Daily Returns

New Zealand Oil  vs.  Beach Energy

New Zealand Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Zealand Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, New Zealand is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Beach Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beach Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Beach Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Zealand and Beach Energy

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

The idea behind New Zealand Oil and Beach Energy 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.