Correlation Between Advantage Oil and Bonterra Energy

Can any of the company-specific risk be diversified away by investing in both Advantage Oil and Bonterra 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 Advantage Oil and Bonterra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advantage Oil Gas and Bonterra Energy Corp, you can compare the effects of market volatilities on Advantage Oil and Bonterra 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 Advantage Oil with a short position of Bonterra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Oil and Bonterra Energy.

Diversification Opportunities for Advantage Oil and Bonterra Energy

0.65

Correlation Coefficient

Advantage Oil  Bonterra Energy

Poor diversification

The 3 months correlation between Advantage and Bonterra is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Oil Gas and Bonterra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonterra Energy Corp and Advantage 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 Advantage Oil Gas are associated (or correlated) with Bonterra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonterra Energy Corp has no effect on the direction of Advantage Oil i.e., Advantage Oil and Bonterra Energy go up and down completely randomly.

Pair Corralation between Advantage Oil and Bonterra Energy

Assuming the 90 days trading horizon Advantage Oil Gas is expected to generate 0.85 times more return on investment than Bonterra Energy. However, Advantage Oil Gas is 1.18 times less risky than Bonterra Energy. It trades about 0.0 of its potential returns per unit of risk. Bonterra Energy Corp is currently generating about -0.04 per unit of risk. If you would invest  951.00  in Advantage Oil Gas on September 12, 2024 and sell it today you would lose (78.00) from holding Advantage Oil Gas or give up 8.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Advantage Oil Gas  vs.  Bonterra Energy Corp

Advantage Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advantage Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Advantage Oil is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bonterra Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonterra Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Advantage Oil and Bonterra Energy

The main advantage of trading using opposite Advantage Oil and Bonterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Oil position performs unexpectedly, Bonterra 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 Bonterra Energy will offset losses from the drop in Bonterra Energy's long position.

The idea behind Advantage Oil Gas and Bonterra Energy Corp 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.