Correlation Between Basic Energy and First Abacus

Can any of the company-specific risk be diversified away by investing in both Basic Energy and First Abacus 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 First Abacus 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 First Abacus Financial, you can compare the effects of market volatilities on Basic Energy and First Abacus 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 First Abacus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Energy and First Abacus.

Diversification Opportunities for Basic Energy and First Abacus

0.09

Correlation Coefficient

Basic Energy  First Abacus

Significant diversification

The 3 months correlation between Basic and First is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Basic Energy Corp and First Abacus Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Abacus Financial 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 First Abacus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Abacus Financial has no effect on the direction of Basic Energy i.e., Basic Energy and First Abacus go up and down completely randomly.

Pair Corralation between Basic Energy and First Abacus

Assuming the 90 days trading horizon Basic Energy Corp is expected to under-perform the First Abacus. But the stock apears to be less risky and, when comparing its historical volatility, Basic Energy Corp is 1.31 times less risky than First Abacus. The stock trades about -0.01 of its potential returns per unit of risk. The First Abacus Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  62.00  in First Abacus Financial on April 22, 2025 and sell it today you would lose (1.00) from holding First Abacus Financial or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	22.95%
Values	Daily Returns

Basic Energy Corp  vs.  First Abacus Financial

Basic Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Basic Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

First Abacus Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Abacus Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First Abacus is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Basic Energy and First Abacus

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

The idea behind Basic Energy Corp and First Abacus Financial 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.