Correlation Between Antero Resources and Baytex Energy

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

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

Diversification Opportunities for Antero Resources and Baytex Energy

0.3

Correlation Coefficient

Antero Resources  Baytex Energy

Weak diversification

The 3 months correlation between Antero and Baytex is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Antero Resources 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 Antero Resources 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 Antero Resources 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 Antero Resources i.e., Antero Resources and Baytex Energy go up and down completely randomly.

Pair Corralation between Antero Resources and Baytex Energy

Allowing for the 90-day total investment horizon Antero Resources Corp is expected to generate 0.92 times more return on investment than Baytex Energy. However, Antero Resources Corp is 1.09 times less risky than Baytex Energy. It trades about 0.12 of its potential returns per unit of risk. Baytex Energy Corp is currently generating about -0.02 per unit of risk. If you would invest  3,330  in Antero Resources Corp on December 27, 2024 and sell it today you would earn a total of  623.00  from holding Antero Resources Corp or generate 18.71% return on investment over 90 days.

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

Antero Resources Corp  vs.  Baytex Energy Corp

Antero Resources Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Resources Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Antero Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Baytex Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baytex Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Baytex Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Antero Resources and Baytex Energy

The main advantage of trading using opposite Antero Resources and Baytex Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Resources 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.

The idea behind Antero Resources Corp and Baytex 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.