Correlation Between ERHC Energy and Frontera Energy

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

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

Diversification Opportunities for ERHC Energy and Frontera Energy

-0.2

Correlation Coefficient

ERHC Energy  Frontera Energy

Good diversification

The 3 months correlation between ERHC and Frontera is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding ERHC Energy and Frontera Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontera Energy Corp and ERHC 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 ERHC Energy are associated (or correlated) with Frontera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontera Energy Corp has no effect on the direction of ERHC Energy i.e., ERHC Energy and Frontera Energy go up and down completely randomly.

Pair Corralation between ERHC Energy and Frontera Energy

Given the investment horizon of 90 days ERHC Energy is expected to generate 40.96 times more return on investment than Frontera Energy. However, ERHC Energy is 40.96 times more volatile than Frontera Energy Corp. It trades about 0.11 of its potential returns per unit of risk. Frontera Energy Corp is currently generating about 0.17 per unit of risk. If you would invest  0.01  in ERHC Energy on May 4, 2025 and sell it today you would earn a total of  0.00  from holding ERHC Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

ERHC Energy  vs.  Frontera Energy Corp

ERHC Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ERHC Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, ERHC Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Frontera Energy Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontera Energy Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Frontera Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ERHC Energy and Frontera Energy

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

The idea behind ERHC Energy and Frontera 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.