Correlation Between ROK Resources and Ngx Energy

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

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

Diversification Opportunities for ROK Resources and Ngx Energy

-0.06

Correlation Coefficient

ROK Resources  Ngx Energy

Good diversification

The 3 months correlation between ROK and Ngx is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding ROK Resources and Ngx Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ngx Energy International and ROK Resources 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 ROK Resources are associated (or correlated) with Ngx Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ngx Energy International has no effect on the direction of ROK Resources i.e., ROK Resources and Ngx Energy go up and down completely randomly.

Pair Corralation between ROK Resources and Ngx Energy

Assuming the 90 days horizon ROK Resources is expected to under-perform the Ngx Energy. In addition to that, ROK Resources is 1.37 times more volatile than Ngx Energy International. It trades about -0.04 of its total potential returns per unit of risk. Ngx Energy International is currently generating about 0.09 per unit of volatility. If you would invest  70.00  in Ngx Energy International on October 24, 2024 and sell it today you would earn a total of  10.00  from holding Ngx Energy International or generate 14.29% return on investment over 90 days.

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

ROK Resources  vs.  Ngx Energy International

ROK Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROK Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Ngx Energy International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ngx Energy International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ngx Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ROK Resources and Ngx Energy

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

The idea behind ROK Resources and Ngx Energy International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.