Correlation Between Bonterra Energy and First National

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

Diversification Opportunities for Bonterra Energy and First National

0.43

Correlation Coefficient

Bonterra Energy  First National

Very weak diversification

The 3 months correlation between Bonterra and First is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bonterra Energy Corp and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of Bonterra Energy i.e., Bonterra Energy and First National go up and down completely randomly.

Pair Corralation between Bonterra Energy and First National

Assuming the 90 days horizon Bonterra Energy Corp is expected to generate 0.17 times more return on investment than First National. However, Bonterra Energy Corp is 5.85 times less risky than First National. It trades about 0.19 of its potential returns per unit of risk. First National Energy is currently generating about -0.22 per unit of risk. If you would invest  238.00  in Bonterra Energy Corp on October 11, 2024 and sell it today you would earn a total of  25.00  from holding Bonterra Energy Corp or generate 10.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Bonterra Energy Corp  vs.  First National 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. Despite nearly stable technical and fundamental indicators, Bonterra Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First National Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First National Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, First National exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bonterra Energy and First National

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

The idea behind Bonterra Energy Corp and First National 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.