Correlation Between Premiere Entertainment and Basic Energy

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

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

Diversification Opportunities for Premiere Entertainment and Basic Energy

0.05

Correlation Coefficient

Premiere Entertainment  Basic Energy

Significant diversification

The 3 months correlation between Premiere and Basic is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Premiere Entertainment 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 Premiere Entertainment 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 Premiere Entertainment 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 Premiere Entertainment i.e., Premiere Entertainment and Basic Energy go up and down completely randomly.

Pair Corralation between Premiere Entertainment and Basic Energy

Assuming the 90 days trading horizon Premiere Entertainment is expected to under-perform the Basic Energy. But the stock apears to be less risky and, when comparing its historical volatility, Premiere Entertainment is 1.23 times less risky than Basic Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Basic Energy Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Basic Energy Corp on October 25, 2024 and sell it today you would lose (1.00) from holding Basic Energy Corp or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Premiere Entertainment  vs.  Basic Energy Corp

Premiere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premiere Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Premiere Entertainment and Basic Energy

The main advantage of trading using opposite Premiere Entertainment and Basic Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premiere Entertainment 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 Premiere Entertainment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.