Correlation Between Pine Cliff and Prairie Provident
Can any of the company-specific risk be diversified away by investing in both Pine Cliff and Prairie Provident 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 Prairie Provident 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 Prairie Provident Resources, you can compare the effects of market volatilities on Pine Cliff and Prairie Provident 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 Prairie Provident. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pine Cliff and Prairie Provident.
Diversification Opportunities for Pine Cliff and Prairie Provident
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pine and Prairie is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident 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 Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Pine Cliff i.e., Pine Cliff and Prairie Provident go up and down completely randomly.
Pair Corralation between Pine Cliff and Prairie Provident
Assuming the 90 days trading horizon Pine Cliff Energy is expected to under-perform the Prairie Provident. But the stock apears to be less risky and, when comparing its historical volatility, Pine Cliff Energy is 3.99 times less risky than Prairie Provident. The stock trades about -0.03 of its potential returns per unit of risk. The Prairie Provident Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Prairie Provident Resources on September 12, 2024 and sell it today you would lose (5.00) from holding Prairie Provident Resources or give up 62.5% 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. Prairie Provident Resources
Performance |
| Timeline |
| Pine Cliff Energy |
| Prairie Provident |
Pine Cliff and Prairie Provident Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pine Cliff and Prairie Provident
The main advantage of trading using opposite Pine Cliff and Prairie Provident positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pine Cliff position performs unexpectedly, Prairie Provident 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 Prairie Provident will offset losses from the drop in Prairie Provident's long position.| Pine Cliff vs. Gear Energy | Pine Cliff vs. Headwater Exploration | Pine Cliff vs. Cardinal Energy | Pine Cliff vs. Journey Energy |
| Prairie Provident vs. Pine Cliff Energy | Prairie Provident vs. InPlay Oil Corp | Prairie Provident 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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