Correlation Between Pine Cliff and Arrow Exploration
Can any of the company-specific risk be diversified away by investing in both Pine Cliff 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 Pine Cliff and Arrow Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pine Cliff Energy and Arrow Exploration Corp, you can compare the effects of market volatilities on Pine Cliff 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 Pine Cliff with a short position of Arrow Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pine Cliff and Arrow Exploration.
Diversification Opportunities for Pine Cliff and Arrow Exploration
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pine and Arrow is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy 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 Pine Cliff 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 Pine Cliff Energy 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 Pine Cliff i.e., Pine Cliff and Arrow Exploration go up and down completely randomly.
Pair Corralation between Pine Cliff and Arrow Exploration
Assuming the 90 days trading horizon Pine Cliff Energy is expected to under-perform the Arrow Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Pine Cliff Energy is 1.46 times less risky than Arrow Exploration. The stock trades about -0.03 of its potential returns per unit of risk. The Arrow Exploration Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Arrow Exploration Corp on September 1, 2024 and sell it today you would earn a total of 15.00 from holding Arrow Exploration Corp or generate 57.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pine Cliff Energy vs. Arrow Exploration Corp
Performance |
| Timeline |
| Pine Cliff Energy |
| Arrow Exploration Corp |
Pine Cliff and Arrow Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pine Cliff and Arrow Exploration
The main advantage of trading using opposite Pine Cliff and Arrow Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pine Cliff 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.| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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