Correlation Between US Energy and Baytex Energy
Can any of the company-specific risk be diversified away by investing in both US Energy and Baytex 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 US Energy and Baytex Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Energy Corp and Baytex Energy Corp, you can compare the effects of market volatilities on US Energy and Baytex 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 US Energy with a short position of Baytex Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Energy and Baytex Energy.
Diversification Opportunities for US Energy and Baytex Energy
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between USEG and Baytex is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp and US Energy 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 US Energy Corp are associated (or correlated) with Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of US Energy i.e., US Energy and Baytex Energy go up and down completely randomly.
Pair Corralation between US Energy and Baytex Energy
Given the investment horizon of 90 days US Energy Corp is expected to generate 2.43 times more return on investment than Baytex Energy. However, US Energy is 2.43 times more volatile than Baytex Energy Corp. It trades about 0.25 of its potential returns per unit of risk. Baytex Energy Corp is currently generating about -0.2 per unit of risk. If you would invest 142.00 in US Energy Corp on September 4, 2024 and sell it today you would earn a total of 35.00 from holding US Energy Corp or generate 24.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Energy Corp vs. Baytex Energy Corp
Performance |
| Timeline |
| US Energy Corp |
| Baytex Energy Corp |
US Energy and Baytex Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Energy and Baytex Energy
The main advantage of trading using opposite US Energy and Baytex Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Energy position performs unexpectedly, Baytex 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 Baytex Energy will offset losses from the drop in Baytex Energy's long position.| US Energy vs. Evolution Petroleum | US Energy vs. Ring Energy | US Energy vs. Gran Tierra Energy | US Energy vs. PEDEVCO Corp |
| Baytex Energy vs. Vermilion Energy | Baytex Energy vs. Obsidian Energy | Baytex Energy vs. Canadian Natural Resources | Baytex Energy vs. Ovintiv |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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