Correlation Between Pieridae Energy and ROK Resources

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

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

Diversification Opportunities for Pieridae Energy and ROK Resources

-0.15

Correlation Coefficient

Pieridae Energy  ROK Resources

Good diversification

The 3 months correlation between Pieridae and ROK is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Pieridae Energy Limited and ROK Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROK Resources and Pieridae 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 Pieridae Energy Limited are associated (or correlated) with ROK Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROK Resources has no effect on the direction of Pieridae Energy i.e., Pieridae Energy and ROK Resources go up and down completely randomly.

Pair Corralation between Pieridae Energy and ROK Resources

Assuming the 90 days horizon Pieridae Energy Limited is expected to generate 1.06 times more return on investment than ROK Resources. However, Pieridae Energy is 1.06 times more volatile than ROK Resources. It trades about 0.14 of its potential returns per unit of risk. ROK Resources is currently generating about -0.01 per unit of risk. If you would invest  18.00  in Pieridae Energy Limited on December 29, 2024 and sell it today you would earn a total of  7.00  from holding Pieridae Energy Limited or generate 38.89% return on investment over 90 days.

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

Pieridae Energy Limited  vs.  ROK Resources

Pieridae Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pieridae Energy Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pieridae Energy reported solid returns over the last few months and may actually be approaching a breakup point.

ROK Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days ROK Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ROK Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pieridae Energy and ROK Resources

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

The idea behind Pieridae Energy Limited and ROK 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.