Correlation Between Tamarack Valley and Headwater Exploration
Can any of the company-specific risk be diversified away by investing in both Tamarack Valley 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 Tamarack Valley and Headwater Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tamarack Valley Energy and Headwater Exploration, you can compare the effects of market volatilities on Tamarack Valley 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 Tamarack Valley with a short position of Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tamarack Valley and Headwater Exploration.
Diversification Opportunities for Tamarack Valley and Headwater Exploration
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tamarack and Headwater is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tamarack Valley Energy and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration and Tamarack Valley 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 Tamarack Valley 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 Tamarack Valley i.e., Tamarack Valley and Headwater Exploration go up and down completely randomly.
Pair Corralation between Tamarack Valley and Headwater Exploration
Assuming the 90 days horizon Tamarack Valley is expected to generate 2.73 times less return on investment than Headwater Exploration. In addition to that, Tamarack Valley is 1.16 times more volatile than Headwater Exploration. It trades about 0.01 of its total potential returns per unit of risk. Headwater Exploration is currently generating about 0.03 per unit of volatility. If you would invest 412.00 in Headwater Exploration on August 26, 2024 and sell it today you would earn a total of 105.00 from holding Headwater Exploration or generate 25.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Tamarack Valley Energy vs. Headwater Exploration
Performance |
| Timeline |
| Tamarack Valley Energy |
| Headwater Exploration |
Tamarack Valley and Headwater Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tamarack Valley and Headwater Exploration
The main advantage of trading using opposite Tamarack Valley and Headwater Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tamarack Valley 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.| Tamarack Valley vs. Petroleo Brasileiro Petrobras | Tamarack Valley vs. Equinor ASA ADR | Tamarack Valley vs. Eni SpA ADR | Tamarack Valley vs. YPF Sociedad Anonima |
| Headwater Exploration vs. Petroleo Brasileiro Petrobras | Headwater Exploration vs. Equinor ASA ADR | Headwater Exploration vs. Eni SpA ADR | Headwater Exploration vs. YPF Sociedad Anonima |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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