Correlation Between Canaf Investments and Paramount Resources

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

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

Diversification Opportunities for Canaf Investments and Paramount Resources

-0.2

Correlation Coefficient

Canaf Investments  Paramount Resources

Good diversification

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

Pair Corralation between Canaf Investments and Paramount Resources

Assuming the 90 days horizon Canaf Investments is expected to generate 1.17 times less return on investment than Paramount Resources. In addition to that, Canaf Investments is 1.84 times more volatile than Paramount Resources. It trades about 0.03 of its total potential returns per unit of risk. Paramount Resources is currently generating about 0.07 per unit of volatility. If you would invest  1,617  in Paramount Resources on December 22, 2024 and sell it today you would earn a total of  134.00  from holding Paramount Resources or generate 8.29% return on investment over 90 days.

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

Canaf Investments  vs.  Paramount Resources

Canaf Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Canaf Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Paramount Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Paramount Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canaf Investments and Paramount Resources

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

The idea behind Canaf Investments and Paramount Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.