Correlation Between Battalion Oil and Canacol Energy

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

Diversification Opportunities for Battalion Oil and Canacol Energy

-0.45

Correlation Coefficient

Battalion Oil  Canacol Energy

Very good diversification

The 3 months correlation between Battalion and Canacol is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Battalion Oil Corp and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol Energy and Battalion 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 Battalion Oil Corp 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 Battalion Oil i.e., Battalion Oil and Canacol Energy go up and down completely randomly.

Pair Corralation between Battalion Oil and Canacol Energy

Given the investment horizon of 90 days Battalion Oil Corp is expected to under-perform the Canacol Energy. In addition to that, Battalion Oil is 1.83 times more volatile than Canacol Energy. It trades about -0.07 of its total potential returns per unit of risk. Canacol Energy is currently generating about 0.01 per unit of volatility. If you would invest  258.00  in Canacol Energy on December 30, 2024 and sell it today you would lose (4.00) from holding Canacol Energy or give up 1.55% of portfolio value over 90 days.

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

Battalion Oil Corp  vs.  Canacol Energy

Battalion Oil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Battalion Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Canacol Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canacol Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Canacol Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Battalion Oil and Canacol Energy

The main advantage of trading using opposite Battalion Oil and Canacol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Battalion 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 Battalion Oil Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.