Correlation Between ROC Energy and Xtra Energy

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

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

Diversification Opportunities for ROC Energy and Xtra Energy

-0.61

Correlation Coefficient

ROC Energy  Xtra Energy

Excellent diversification

The 3 months correlation between ROC and Xtra is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding ROC Energy Acquisition and Xtra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtra Energy Corp and ROC 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 ROC Energy Acquisition are associated (or correlated) with Xtra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtra Energy Corp has no effect on the direction of ROC Energy i.e., ROC Energy and Xtra Energy go up and down completely randomly.

Pair Corralation between ROC Energy and Xtra Energy

If you would invest  14.00  in Xtra Energy Corp on September 14, 2024 and sell it today you would earn a total of  10.00  from holding Xtra Energy Corp or generate 71.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

ROC Energy Acquisition  vs.  Xtra Energy Corp

ROC Energy Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Xtra Energy Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtra Energy Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Xtra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ROC Energy and Xtra Energy

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

The idea behind ROC Energy Acquisition and Xtra 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.