Correlation Between PrimeEnergy and Adams Resources

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

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

Diversification Opportunities for PrimeEnergy and Adams Resources

0.63

Correlation Coefficient

PrimeEnergy  Adams Resources

Poor diversification

The 3 months correlation between PrimeEnergy and Adams is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy and PrimeEnergy 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 PrimeEnergy are associated (or correlated) with Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of PrimeEnergy i.e., PrimeEnergy and Adams Resources go up and down completely randomly.

Pair Corralation between PrimeEnergy and Adams Resources

Given the investment horizon of 90 days PrimeEnergy is expected to generate 1.91 times less return on investment than Adams Resources. In addition to that, PrimeEnergy is 5.91 times more volatile than Adams Resources Energy. It trades about 0.01 of its total potential returns per unit of risk. Adams Resources Energy is currently generating about 0.17 per unit of volatility. If you would invest  3,722  in Adams Resources Energy on December 29, 2024 and sell it today you would earn a total of  76.00  from holding Adams Resources Energy or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.32%
Values	Daily Returns

PrimeEnergy  vs.  Adams Resources Energy

PrimeEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PrimeEnergy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Adams Resources Energy

Risk-Adjusted Performance

Good

Over the last 90 days Adams Resources Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adams Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PrimeEnergy and Adams Resources

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

The idea behind PrimeEnergy and Adams Resources 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.