Correlation Between Frontera Energy and Arrow Exploration
Can any of the company-specific risk be diversified away by investing in both Frontera Energy and Arrow Exploration 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 Frontera Energy and Arrow Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontera Energy Corp and Arrow Exploration Corp, you can compare the effects of market volatilities on Frontera Energy and Arrow Exploration 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 Frontera Energy with a short position of Arrow Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontera Energy and Arrow Exploration.
Diversification Opportunities for Frontera Energy and Arrow Exploration
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Frontera and Arrow is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Frontera Energy Corp and Arrow Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Exploration Corp and Frontera 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 Frontera Energy Corp are associated (or correlated) with Arrow Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Exploration Corp has no effect on the direction of Frontera Energy i.e., Frontera Energy and Arrow Exploration go up and down completely randomly.
Pair Corralation between Frontera Energy and Arrow Exploration
Assuming the 90 days horizon Frontera Energy is expected to generate 2.66 times less return on investment than Arrow Exploration. But when comparing it to its historical volatility, Frontera Energy Corp is 9.71 times less risky than Arrow Exploration. It trades about 0.15 of its potential returns per unit of risk. Arrow Exploration Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 33.00 in Arrow Exploration Corp on September 2, 2024 and sell it today you would lose (4.00) from holding Arrow Exploration Corp or give up 12.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontera Energy Corp vs. Arrow Exploration Corp
Performance |
| Timeline |
| Frontera Energy Corp |
| Arrow Exploration Corp |
Frontera Energy and Arrow Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontera Energy and Arrow Exploration
The main advantage of trading using opposite Frontera Energy and Arrow Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontera Energy position performs unexpectedly, Arrow Exploration 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 Arrow Exploration will offset losses from the drop in Arrow Exploration's long position.| Frontera Energy vs. Petroleo Brasileiro Petrobras | Frontera Energy vs. Equinor ASA ADR | Frontera Energy vs. Eni SpA ADR | Frontera Energy vs. YPF Sociedad Anonima |
| Arrow Exploration vs. Permian Resources | Arrow Exploration vs. Devon Energy | Arrow Exploration vs. EOG Resources | Arrow Exploration vs. Coterra Energy |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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