Correlation Between Bonterra Energy and Surge Energy

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

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

Diversification Opportunities for Bonterra Energy and Surge Energy

0.8

Correlation Coefficient

Bonterra Energy  Surge Energy

Very poor diversification

The 3 months correlation between Bonterra and Surge is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bonterra Energy Corp and Surge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Energy and Bonterra 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 Bonterra Energy Corp are associated (or correlated) with Surge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Energy has no effect on the direction of Bonterra Energy i.e., Bonterra Energy and Surge Energy go up and down completely randomly.

Pair Corralation between Bonterra Energy and Surge Energy

Assuming the 90 days trading horizon Bonterra Energy Corp is expected to under-perform the Surge Energy. In addition to that, Bonterra Energy is 1.2 times more volatile than Surge Energy. It trades about -0.08 of its total potential returns per unit of risk. Surge Energy is currently generating about -0.04 per unit of volatility. If you would invest  742.00  in Surge Energy on September 12, 2024 and sell it today you would lose (217.00) from holding Surge Energy or give up 29.25% of portfolio value over 90 days.

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

Bonterra Energy Corp  vs.  Surge Energy

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.

Surge Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic 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 Bonterra Energy and Surge Energy

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

The idea behind Bonterra Energy Corp and Surge 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.