Correlation Between Chicago Atlantic and Alligator Energy

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

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

Diversification Opportunities for Chicago Atlantic and Alligator Energy

-0.35

Correlation Coefficient

Chicago Atlantic  Alligator Energy

Very good diversification

The 3 months correlation between Chicago and Alligator is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chicago Atlantic Real and Alligator Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alligator Energy and Chicago Atlantic 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 Chicago Atlantic Real are associated (or correlated) with Alligator Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alligator Energy has no effect on the direction of Chicago Atlantic i.e., Chicago Atlantic and Alligator Energy go up and down completely randomly.

Pair Corralation between Chicago Atlantic and Alligator Energy

Given the investment horizon of 90 days Chicago Atlantic is expected to generate 60.79 times less return on investment than Alligator Energy. But when comparing it to its historical volatility, Chicago Atlantic Real is 13.7 times less risky than Alligator Energy. It trades about 0.01 of its potential returns per unit of risk. Alligator Energy Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.95  in Alligator Energy Limited on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Alligator Energy Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Chicago Atlantic Real  vs.  Alligator Energy Limited

Chicago Atlantic Real

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic Real are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Chicago Atlantic is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Alligator Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alligator Energy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Alligator Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chicago Atlantic and Alligator Energy

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

The idea behind Chicago Atlantic Real and Alligator Energy Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.