Correlation Between Power Financial and Valeura Energy
Can any of the company-specific risk be diversified away by investing in both Power Financial and Valeura 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 Power Financial and Valeura Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Financial Corp and Valeura Energy, you can compare the effects of market volatilities on Power Financial and Valeura 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 Power Financial with a short position of Valeura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Valeura Energy.
Diversification Opportunities for Power Financial and Valeura Energy
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Power and Valeura is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy and Power Financial 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 Power Financial Corp are associated (or correlated) with Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Power Financial i.e., Power Financial and Valeura Energy go up and down completely randomly.
Pair Corralation between Power Financial and Valeura Energy
Assuming the 90 days trading horizon Power Financial Corp is expected to generate 0.85 times more return on investment than Valeura Energy. However, Power Financial Corp is 1.18 times less risky than Valeura Energy. It trades about 0.05 of its potential returns per unit of risk. Valeura Energy is currently generating about -0.09 per unit of risk. If you would invest 1,665 in Power Financial Corp on November 9, 2024 and sell it today you would earn a total of 10.00 from holding Power Financial Corp or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 31.82% |
| Values | Daily Returns |
Power Financial Corp vs. Valeura Energy
Performance |
| Timeline |
| Power Financial Corp |
| Valeura Energy |
Power Financial and Valeura Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Financial and Valeura Energy
The main advantage of trading using opposite Power Financial and Valeura Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Financial position performs unexpectedly, Valeura 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 Valeura Energy will offset losses from the drop in Valeura Energy's long position.| Power Financial vs. CI Financial Corp | Power Financial vs. North American Financial | Power Financial vs. Sun Peak Metals | Power Financial vs. Financial 15 Split |
| Valeura Energy vs. Yangarra Resources | Valeura Energy vs. Africa Oil Corp | Valeura Energy vs. Gear Energy | Valeura Energy vs. Gran Tierra 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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