Correlation Between Parex Resources and Surge Energy

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

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

Diversification Opportunities for Parex Resources and Surge Energy

0.66

Correlation Coefficient

Parex Resources  Surge Energy

Poor diversification

The 3 months correlation between Parex and Surge is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Parex Resources and Surge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Energy and Parex Resources 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 Parex Resources are associated (or correlated) with Surge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Energy has no effect on the direction of Parex Resources i.e., Parex Resources and Surge Energy go up and down completely randomly.

Pair Corralation between Parex Resources and Surge Energy

Assuming the 90 days horizon Parex Resources is expected to generate 17.42 times less return on investment than Surge Energy. But when comparing it to its historical volatility, Parex Resources is 1.05 times less risky than Surge Energy. It trades about 0.01 of its potential returns per unit of risk. Surge Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  394.00  in Surge Energy on December 28, 2024 and sell it today you would earn a total of  45.00  from holding Surge Energy or generate 11.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Parex Resources  vs.  Surge Energy

Parex Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parex Resources has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Surge Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Surge Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parex Resources and Surge Energy

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

The idea behind Parex Resources and Surge 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.