Correlation Between PBF Energy and Blue Earth

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

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

Diversification Opportunities for PBF Energy and Blue Earth

-0.59

Correlation Coefficient

PBF Energy  Blue Earth

Excellent diversification

The 3 months correlation between PBF and Blue is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding PBF Energy and Blue Earth Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Earth Resources and PBF 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 PBF Energy are associated (or correlated) with Blue Earth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Earth Resources has no effect on the direction of PBF Energy i.e., PBF Energy and Blue Earth go up and down completely randomly.

Pair Corralation between PBF Energy and Blue Earth

Considering the 90-day investment horizon PBF Energy is expected to under-perform the Blue Earth. But the stock apears to be less risky and, when comparing its historical volatility, PBF Energy is 5.24 times less risky than Blue Earth. The stock trades about -0.02 of its potential returns per unit of risk. The Blue Earth Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Blue Earth Resources on October 11, 2024 and sell it today you would lose (34.21) from holding Blue Earth Resources or give up 87.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PBF Energy  vs.  Blue Earth Resources

PBF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blue Earth Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Earth Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Blue Earth demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PBF Energy and Blue Earth

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

The idea behind PBF Energy and Blue Earth 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.