Correlation Between First Abacus and Basic Energy

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

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

Diversification Opportunities for First Abacus and Basic Energy

0.09

Correlation Coefficient

First Abacus  Basic Energy

Significant diversification

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

Pair Corralation between First Abacus and Basic Energy

Assuming the 90 days trading horizon First Abacus is expected to generate 1.81 times less return on investment than Basic Energy. In addition to that, First Abacus is 1.33 times more volatile than Basic Energy Corp. It trades about 0.01 of its total potential returns per unit of risk. Basic Energy Corp is currently generating about 0.02 per unit of volatility. If you would invest  12.00  in Basic Energy Corp on April 23, 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	Insignificant
Accuracy	23.33%
Values	Daily Returns

First Abacus Financial  vs.  Basic Energy Corp

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.

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.

Pair Trading with First Abacus and Basic Energy

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

The idea behind First Abacus Financial and Basic 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.