Correlation Between Hess and ADX Energy

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

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

Diversification Opportunities for Hess and ADX Energy

-0.66

Correlation Coefficient

Hess  ADX Energy

Excellent diversification

The 3 months correlation between Hess and ADX is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and ADX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX Energy and Hess 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 Hess Corporation are associated (or correlated) with ADX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX Energy has no effect on the direction of Hess i.e., Hess and ADX Energy go up and down completely randomly.

Pair Corralation between Hess and ADX Energy

Considering the 90-day investment horizon Hess is expected to generate 3.19 times less return on investment than ADX Energy. But when comparing it to its historical volatility, Hess Corporation is 13.13 times less risky than ADX Energy. It trades about 0.22 of its potential returns per unit of risk. ADX Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.97  in ADX Energy on May 3, 2025 and sell it today you would lose (0.46) from holding ADX Energy or give up 15.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.13%
Values	Daily Returns

Hess Corp.  vs.  ADX Energy

Hess

Risk-Adjusted Performance

Solid

Over the last 90 days Hess Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical and fundamental indicators, Hess unveiled solid returns over the last few months and may actually be approaching a breakup point.

ADX Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADX Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, ADX Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hess and ADX Energy

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

The idea behind Hess Corporation and ADX Energy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.