Correlation Between Scotch Creek and Hillcrest Energy
Can any of the company-specific risk be diversified away by investing in both Scotch Creek and Hillcrest 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 Scotch Creek and Hillcrest Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scotch Creek Ventures and Hillcrest Energy Technologies, you can compare the effects of market volatilities on Scotch Creek and Hillcrest 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 Scotch Creek with a short position of Hillcrest Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotch Creek and Hillcrest Energy.
Diversification Opportunities for Scotch Creek and Hillcrest Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Scotch and Hillcrest is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Scotch Creek Ventures and Hillcrest Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillcrest Energy Tec and Scotch Creek 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 Scotch Creek Ventures are associated (or correlated) with Hillcrest Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillcrest Energy Tec has no effect on the direction of Scotch Creek i.e., Scotch Creek and Hillcrest Energy go up and down completely randomly.
Pair Corralation between Scotch Creek and Hillcrest Energy
Assuming the 90 days horizon Scotch Creek Ventures is expected to under-perform the Hillcrest Energy. In addition to that, Scotch Creek is 2.35 times more volatile than Hillcrest Energy Technologies. It trades about -0.17 of its total potential returns per unit of risk. Hillcrest Energy Technologies is currently generating about -0.09 per unit of volatility. If you would invest 16.00 in Hillcrest Energy Technologies on August 28, 2024 and sell it today you would lose (2.00) from holding Hillcrest Energy Technologies or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scotch Creek Ventures vs. Hillcrest Energy Technologies
Performance |
| Timeline |
| Scotch Creek Ventures |
| Hillcrest Energy Tec |
Scotch Creek and Hillcrest Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scotch Creek and Hillcrest Energy
The main advantage of trading using opposite Scotch Creek and Hillcrest Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotch Creek position performs unexpectedly, Hillcrest 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 Hillcrest Energy will offset losses from the drop in Hillcrest Energy's long position.The idea behind Scotch Creek Ventures and Hillcrest Energy Technologies 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.| Hillcrest Energy vs. Permian Resources | Hillcrest Energy vs. Devon Energy | Hillcrest Energy vs. EOG Resources | Hillcrest Energy vs. Coterra 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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