Correlation Between Hallador Energy and Alliance Resource

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

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

Diversification Opportunities for Hallador Energy and Alliance Resource

-0.65

Correlation Coefficient

Hallador Energy  Alliance Resource

Excellent diversification

The 3 months correlation between Hallador and Alliance is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hallador Energy and Alliance Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Resource and Hallador 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 Hallador Energy are associated (or correlated) with Alliance Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Resource has no effect on the direction of Hallador Energy i.e., Hallador Energy and Alliance Resource go up and down completely randomly.

Pair Corralation between Hallador Energy and Alliance Resource

Given the investment horizon of 90 days Hallador Energy is expected to generate 4.48 times less return on investment than Alliance Resource. In addition to that, Hallador Energy is 2.01 times more volatile than Alliance Resource Partners. It trades about 0.04 of its total potential returns per unit of risk. Alliance Resource Partners is currently generating about 0.39 per unit of volatility. If you would invest  2,091  in Alliance Resource Partners on February 5, 2024 and sell it today you would earn a total of  234.00  from holding Alliance Resource Partners or generate 11.19% return on investment over 90 days.

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

Hallador Energy  vs.  Alliance Resource Partners

Hallador Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hallador Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alliance Resource

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Resource Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady essential indicators, Alliance Resource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hallador Energy and Alliance Resource

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

The idea behind Hallador Energy and Alliance Resource Partners 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.