Correlation Between Pine Cliff and Headwater Exploration
Can any of the company-specific risk be diversified away by investing in both Pine Cliff and Headwater 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 Headwater 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 Headwater Exploration, you can compare the effects of market volatilities on Pine Cliff and Headwater 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 Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pine Cliff and Headwater Exploration.
Diversification Opportunities for Pine Cliff and Headwater Exploration
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pine and Headwater is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration 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 Headwater Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Exploration has no effect on the direction of Pine Cliff i.e., Pine Cliff and Headwater Exploration go up and down completely randomly.
Pair Corralation between Pine Cliff and Headwater Exploration
Assuming the 90 days trading horizon Pine Cliff Energy is expected to under-perform the Headwater Exploration. In addition to that, Pine Cliff is 1.01 times more volatile than Headwater Exploration. It trades about -0.34 of its total potential returns per unit of risk. Headwater Exploration is currently generating about -0.17 per unit of volatility. If you would invest 689.00 in Headwater Exploration on November 28, 2024 and sell it today you would lose (46.00) from holding Headwater Exploration or give up 6.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pine Cliff Energy vs. Headwater Exploration
Performance |
| Timeline |
| Pine Cliff Energy |
| Headwater Exploration |
Pine Cliff and Headwater Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pine Cliff and Headwater Exploration
The main advantage of trading using opposite Pine Cliff and Headwater Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pine Cliff position performs unexpectedly, Headwater 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 Headwater Exploration will offset losses from the drop in Headwater Exploration's long position.The idea behind Pine Cliff Energy and Headwater Exploration 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.| Headwater Exploration vs. Tamarack Valley Energy | Headwater Exploration vs. Cardinal Energy | Headwater Exploration vs. NuVista 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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