Correlation Between Boralex and First National

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

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

Diversification Opportunities for Boralex and First National

0.5

Correlation Coefficient

Boralex  First National

Very weak diversification

The 3 months correlation between Boralex and First is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Boralex 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 Boralex 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 Boralex 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 Boralex i.e., Boralex and First National go up and down completely randomly.

Pair Corralation between Boralex and First National

Assuming the 90 days horizon Boralex is expected to under-perform the First National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Boralex is 4.06 times less risky than First National. The pink sheet trades about -0.02 of its potential returns per unit of risk. The First National Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  66.00  in First National Energy on September 13, 2024 and sell it today you would lose (56.94) from holding First National Energy or give up 86.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Boralex  vs.  First National Energy

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

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

First National Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Boralex and First National

The main advantage of trading using opposite Boralex and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boralex 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 Boralex 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.