Correlation Between Headwater Exploration and Cardinal Energy
Can any of the company-specific risk be diversified away by investing in both Headwater Exploration and Cardinal 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 Headwater Exploration and Cardinal Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Headwater Exploration and Cardinal Energy, you can compare the effects of market volatilities on Headwater Exploration and Cardinal 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 Headwater Exploration with a short position of Cardinal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Headwater Exploration and Cardinal Energy.
Diversification Opportunities for Headwater Exploration and Cardinal Energy
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Headwater and Cardinal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Headwater Exploration and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Energy and Headwater Exploration 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 Headwater Exploration are associated (or correlated) with Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of Headwater Exploration i.e., Headwater Exploration and Cardinal Energy go up and down completely randomly.
Pair Corralation between Headwater Exploration and Cardinal Energy
Assuming the 90 days trading horizon Headwater Exploration is expected to generate 1.12 times more return on investment than Cardinal Energy. However, Headwater Exploration is 1.12 times more volatile than Cardinal Energy. It trades about 0.02 of its potential returns per unit of risk. Cardinal Energy is currently generating about 0.02 per unit of risk. If you would invest 568.00 in Headwater Exploration on November 28, 2024 and sell it today you would earn a total of 75.00 from holding Headwater Exploration or generate 13.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Headwater Exploration vs. Cardinal Energy
Performance |
| Timeline |
| Headwater Exploration |
| Cardinal Energy |
Headwater Exploration and Cardinal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Headwater Exploration and Cardinal Energy
The main advantage of trading using opposite Headwater Exploration and Cardinal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Headwater Exploration position performs unexpectedly, Cardinal 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 Cardinal Energy will offset losses from the drop in Cardinal Energy's long position.| Headwater Exploration vs. Tamarack Valley Energy | Headwater Exploration vs. Cardinal Energy | Headwater Exploration vs. NuVista Energy |
| Cardinal Energy vs. Tamarack Valley Energy | Cardinal Energy vs. Whitecap Resources | Cardinal Energy vs. Athabasca Oil Corp | Cardinal Energy vs. Surge 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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