Correlation Between Basic Energy and ENEX Energy

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

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

Diversification Opportunities for Basic Energy and ENEX Energy

0.24

Correlation Coefficient

Basic Energy  ENEX Energy

Modest diversification

The 3 months correlation between Basic and ENEX is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Basic Energy Corp and ENEX Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEX Energy Corp and Basic 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 Basic Energy Corp are associated (or correlated) with ENEX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEX Energy Corp has no effect on the direction of Basic Energy i.e., Basic Energy and ENEX Energy go up and down completely randomly.

Pair Corralation between Basic Energy and ENEX Energy

Assuming the 90 days trading horizon Basic Energy Corp is expected to generate 1.88 times more return on investment than ENEX Energy. However, Basic Energy is 1.88 times more volatile than ENEX Energy Corp. It trades about 0.02 of its potential returns per unit of risk. ENEX Energy Corp is currently generating about 0.02 per unit of risk. If you would invest  12.00  in Basic Energy Corp on May 16, 2025 and sell it today you would earn a total of  0.00  from holding Basic Energy Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

Basic Energy Corp  vs.  ENEX Energy Corp

Basic Energy Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Energy Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Basic Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ENEX Energy Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ENEX Energy Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ENEX Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Basic Energy and ENEX Energy

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

The idea behind Basic Energy Corp and ENEX 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.