Correlation Between Baytex Energy and EQT

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

Diversification Opportunities for Baytex Energy and EQT

0.2

Correlation Coefficient

Baytex Energy  EQT

Modest diversification

The 3 months correlation between Baytex and EQT is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Baytex Energy Corp and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation 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 EQT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT Corporation has no effect on the direction of Baytex Energy i.e., Baytex Energy and EQT go up and down completely randomly.

Pair Corralation between Baytex Energy and EQT

Considering the 90-day investment horizon Baytex Energy Corp is expected to under-perform the EQT. In addition to that, Baytex Energy is 1.12 times more volatile than EQT Corporation. It trades about -0.02 of its total potential returns per unit of risk. EQT Corporation is currently generating about 0.13 per unit of volatility. If you would invest  4,419  in EQT Corporation on December 27, 2024 and sell it today you would earn a total of  873.00  from holding EQT Corporation or generate 19.76% return on investment over 90 days.

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

Baytex Energy Corp  vs.  EQT Corp.

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 rather sound basic indicators, Baytex Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

EQT Corporation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baytex Energy and EQT

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

The idea behind Baytex Energy Corp and EQT Corporation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.