Correlation Between TAG Oil and WesCan Energy
Can any of the company-specific risk be diversified away by investing in both TAG Oil and WesCan 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 TAG Oil and WesCan Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TAG Oil and WesCan Energy Corp, you can compare the effects of market volatilities on TAG Oil and WesCan 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 TAG Oil with a short position of WesCan Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAG Oil and WesCan Energy.
Diversification Opportunities for TAG Oil and WesCan Energy
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between TAG and WesCan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding TAG Oil and WesCan Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesCan Energy Corp and TAG Oil 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 TAG Oil are associated (or correlated) with WesCan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesCan Energy Corp has no effect on the direction of TAG Oil i.e., TAG Oil and WesCan Energy go up and down completely randomly.
Pair Corralation between TAG Oil and WesCan Energy
Assuming the 90 days horizon TAG Oil is expected to under-perform the WesCan Energy. But the stock apears to be less risky and, when comparing its historical volatility, TAG Oil is 1.84 times less risky than WesCan Energy. The stock trades about -0.1 of its potential returns per unit of risk. The WesCan Energy Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5.00 in WesCan Energy Corp on September 3, 2024 and sell it today you would earn a total of 4.00 from holding WesCan Energy Corp or generate 80.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
TAG Oil vs. WesCan Energy Corp
Performance |
| Timeline |
| TAG Oil |
| WesCan Energy Corp |
TAG Oil and WesCan Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAG Oil and WesCan Energy
The main advantage of trading using opposite TAG Oil and WesCan Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAG Oil position performs unexpectedly, WesCan 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 WesCan Energy will offset losses from the drop in WesCan Energy's long position.| TAG Oil vs. Southern Energy Corp | TAG Oil vs. ShaMaran Petroleum Corp | TAG Oil vs. Tenaz Energy Corp | TAG Oil vs. Hemisphere 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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