Correlation Between McChip Resources and Pine Cliff
Can any of the company-specific risk be diversified away by investing in both McChip Resources and Pine Cliff 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 McChip Resources and Pine Cliff into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McChip Resources and Pine Cliff Energy, you can compare the effects of market volatilities on McChip Resources and Pine Cliff 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 McChip Resources with a short position of Pine Cliff. Check out your portfolio center. Please also check ongoing floating volatility patterns of McChip Resources and Pine Cliff.
Diversification Opportunities for McChip Resources and Pine Cliff
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between McChip and Pine is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding McChip Resources and Pine Cliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pine Cliff Energy and McChip 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 McChip Resources are associated (or correlated) with Pine Cliff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pine Cliff Energy has no effect on the direction of McChip Resources i.e., McChip Resources and Pine Cliff go up and down completely randomly.
Pair Corralation between McChip Resources and Pine Cliff
Assuming the 90 days horizon McChip Resources is expected to generate 1.78 times more return on investment than Pine Cliff. However, McChip Resources is 1.78 times more volatile than Pine Cliff Energy. It trades about 0.03 of its potential returns per unit of risk. Pine Cliff Energy is currently generating about -0.03 per unit of risk. If you would invest 67.00 in McChip Resources on September 2, 2024 and sell it today you would earn a total of 23.00 from holding McChip Resources or generate 34.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McChip Resources vs. Pine Cliff Energy
Performance |
| Timeline |
| McChip Resources |
| Pine Cliff Energy |
McChip Resources and Pine Cliff Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McChip Resources and Pine Cliff
The main advantage of trading using opposite McChip Resources and Pine Cliff positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McChip Resources position performs unexpectedly, Pine Cliff 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 Pine Cliff will offset losses from the drop in Pine Cliff's long position.The idea behind McChip Resources and Pine Cliff Energy 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.| Pine Cliff vs. Gear Energy | Pine Cliff vs. Headwater Exploration | Pine Cliff vs. Cardinal Energy | Pine Cliff vs. Journey 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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