Correlation Between Advantage Oil and Canacol Energy

Can any of the company-specific risk be diversified away by investing in both Advantage Oil and Canacol 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 Canacol 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 Canacol Energy, you can compare the effects of market volatilities on Advantage Oil and Canacol 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 Canacol Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Oil and Canacol Energy.

Diversification Opportunities for Advantage Oil and Canacol Energy

-0.06

Correlation Coefficient

Advantage Oil  Canacol Energy

Good diversification

The 3 months correlation between Advantage and Canacol is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Oil Gas and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol Energy 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 Canacol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canacol Energy has no effect on the direction of Advantage Oil i.e., Advantage Oil and Canacol Energy go up and down completely randomly.

Pair Corralation between Advantage Oil and Canacol Energy

Assuming the 90 days trading horizon Advantage Oil Gas is expected to generate 0.67 times more return on investment than Canacol Energy. However, Advantage Oil Gas is 1.5 times less risky than Canacol Energy. It trades about 0.09 of its potential returns per unit of risk. Canacol Energy is currently generating about 0.03 per unit of risk. If you would invest  960.00  in Advantage Oil Gas on December 29, 2024 and sell it today you would earn a total of  111.00  from holding Advantage Oil Gas or generate 11.56% return on investment over 90 days.

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

Advantage Oil Gas  vs.  Canacol Energy

Advantage Oil Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Oil Gas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Advantage Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Canacol Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canacol Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Canacol Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Advantage Oil and Canacol Energy

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

The idea behind Advantage Oil Gas and Canacol Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.