Correlation Between Baytex Energy and Pason Systems

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

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

Diversification Opportunities for Baytex Energy and Pason Systems

0.83

Correlation Coefficient

Baytex Energy  Pason Systems

Very poor diversification

The 3 months correlation between Baytex and Pason is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Baytex Energy Corp and Pason Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pason Systems and Baytex 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 Baytex Energy Corp are associated (or correlated) with Pason Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pason Systems has no effect on the direction of Baytex Energy i.e., Baytex Energy and Pason Systems go up and down completely randomly.

Pair Corralation between Baytex Energy and Pason Systems

Assuming the 90 days trading horizon Baytex Energy Corp is expected to under-perform the Pason Systems. In addition to that, Baytex Energy is 1.78 times more volatile than Pason Systems. It trades about -0.11 of its total potential returns per unit of risk. Pason Systems is currently generating about -0.09 per unit of volatility. If you would invest  1,400  in Pason Systems on November 29, 2024 and sell it today you would lose (111.00) from holding Pason Systems or give up 7.93% of portfolio value over 90 days.

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

Baytex Energy Corp  vs.  Pason Systems

Baytex Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baytex Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pason Systems

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Baytex Energy Corp and Pason Systems 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.