Correlation Between PXP Energy and First Abacus

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

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

Diversification Opportunities for PXP Energy and First Abacus

-0.36

Correlation Coefficient

PXP Energy  First Abacus

Very good diversification

The 3 months correlation between PXP and First is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PXP Energy Corp and First Abacus Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Abacus Financial and PXP 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 PXP Energy Corp are associated (or correlated) with First Abacus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Abacus Financial has no effect on the direction of PXP Energy i.e., PXP Energy and First Abacus go up and down completely randomly.

Pair Corralation between PXP Energy and First Abacus

Assuming the 90 days trading horizon PXP Energy Corp is expected to generate 0.73 times more return on investment than First Abacus. However, PXP Energy Corp is 1.37 times less risky than First Abacus. It trades about 0.0 of its potential returns per unit of risk. First Abacus Financial is currently generating about -0.01 per unit of risk. If you would invest  383.00  in PXP Energy Corp on October 8, 2024 and sell it today you would lose (56.00) from holding PXP Energy Corp or give up 14.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	19.06%
Values	Daily Returns

PXP Energy Corp  vs.  First Abacus Financial

PXP Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PXP 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, PXP Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Abacus Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Abacus Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PXP Energy and First Abacus

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

The idea behind PXP Energy Corp and First Abacus Financial 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.