Correlation Between ARC Resources and Parex Resources
Can any of the company-specific risk be diversified away by investing in both ARC Resources and Parex Resources 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 ARC Resources and Parex Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARC Resources and Parex Resources, you can compare the effects of market volatilities on ARC Resources and Parex Resources 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 ARC Resources with a short position of Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARC Resources and Parex Resources.
Diversification Opportunities for ARC Resources and Parex Resources
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARC and Parex is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ARC Resources and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources and ARC Resources 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 ARC Resources are associated (or correlated) with Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of ARC Resources i.e., ARC Resources and Parex Resources go up and down completely randomly.
Pair Corralation between ARC Resources and Parex Resources
Assuming the 90 days trading horizon ARC Resources is expected to generate 0.65 times more return on investment than Parex Resources. However, ARC Resources is 1.54 times less risky than Parex Resources. It trades about 0.03 of its potential returns per unit of risk. Parex Resources is currently generating about -0.08 per unit of risk. If you would invest 2,515 in ARC Resources on August 26, 2024 and sell it today you would earn a total of 161.00 from holding ARC Resources or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARC Resources vs. Parex Resources
Performance |
| Timeline |
| ARC Resources |
| Parex Resources |
ARC Resources and Parex Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARC Resources and Parex Resources
The main advantage of trading using opposite ARC Resources and Parex Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARC Resources position performs unexpectedly, Parex Resources 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 Parex Resources will offset losses from the drop in Parex Resources' long position.| ARC Resources vs. Tourmaline Oil Corp | ARC Resources vs. Whitecap Resources | ARC Resources vs. MEG Energy Corp | ARC Resources vs. Vermilion Energy |
| Parex Resources vs. Tourmaline Oil Corp | Parex Resources vs. PrairieSky Royalty | Parex Resources vs. ARC Resources | Parex Resources vs. MEG Energy Corp |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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