Correlation Between Birchcliff Energy and Paramount Resources

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

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

Diversification Opportunities for Birchcliff Energy and Paramount Resources

-0.04

Correlation Coefficient

Birchcliff Energy  Paramount Resources

Good diversification

The 3 months correlation between Birchcliff and Paramount is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Birchcliff Energy and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources and Birchcliff 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 Birchcliff Energy are associated (or correlated) with Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Birchcliff Energy i.e., Birchcliff Energy and Paramount Resources go up and down completely randomly.

Pair Corralation between Birchcliff Energy and Paramount Resources

Assuming the 90 days horizon Birchcliff Energy is expected to under-perform the Paramount Resources. In addition to that, Birchcliff Energy is 1.15 times more volatile than Paramount Resources. It trades about -0.01 of its total potential returns per unit of risk. Paramount Resources is currently generating about 0.02 per unit of volatility. If you would invest  1,962  in Paramount Resources on October 25, 2024 and sell it today you would earn a total of  111.00  from holding Paramount Resources or generate 5.66% return on investment over 90 days.

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

Birchcliff Energy  vs.  Paramount Resources

Birchcliff Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Birchcliff Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Birchcliff Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Paramount Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Paramount Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Birchcliff Energy and Paramount Resources

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

The idea behind Birchcliff Energy and Paramount Resources 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 Stocks Directory module to find actively traded stocks across global markets.