Correlation Between Talon Energy and Aminex PLC

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

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

Diversification Opportunities for Talon Energy and Aminex PLC

-0.73

Correlation Coefficient

Talon Energy  Aminex PLC

Pay attention - limited upside

The 3 months correlation between Talon and Aminex is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Talon Energy and Aminex PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aminex PLC and Talon 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 Talon Energy are associated (or correlated) with Aminex PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aminex PLC has no effect on the direction of Talon Energy i.e., Talon Energy and Aminex PLC go up and down completely randomly.

Pair Corralation between Talon Energy and Aminex PLC

Assuming the 90 days horizon Talon Energy is expected to generate 9.44 times more return on investment than Aminex PLC. However, Talon Energy is 9.44 times more volatile than Aminex PLC. It trades about 0.08 of its potential returns per unit of risk. Aminex PLC is currently generating about 0.05 per unit of risk. If you would invest  0.50  in Talon Energy on September 3, 2024 and sell it today you would earn a total of  4.50  from holding Talon Energy or generate 900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.65%
Values	Daily Returns

Talon Energy  vs.  Aminex PLC

Talon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aminex PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aminex PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Aminex PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talon Energy and Aminex PLC

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

The idea behind Talon Energy and Aminex PLC 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.