Correlation Between Canacol Energy and Alvopetro Energy

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

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

Diversification Opportunities for Canacol Energy and Alvopetro Energy

-0.55

Correlation Coefficient

Canacol Energy  Alvopetro Energy

Excellent diversification

The 3 months correlation between Canacol and Alvopetro is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Canacol Energy and Alvopetro Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvopetro Energy and Canacol 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 Canacol Energy are associated (or correlated) with Alvopetro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alvopetro Energy has no effect on the direction of Canacol Energy i.e., Canacol Energy and Alvopetro Energy go up and down completely randomly.

Pair Corralation between Canacol Energy and Alvopetro Energy

Assuming the 90 days trading horizon Canacol Energy is expected to under-perform the Alvopetro Energy. In addition to that, Canacol Energy is 1.71 times more volatile than Alvopetro Energy. It trades about -0.04 of its total potential returns per unit of risk. Alvopetro Energy is currently generating about 0.09 per unit of volatility. If you would invest  424.00  in Alvopetro Energy on December 4, 2024 and sell it today you would earn a total of  39.00  from holding Alvopetro Energy or generate 9.2% return on investment over 90 days.

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

Canacol Energy  vs.  Alvopetro Energy

Canacol Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canacol Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Alvopetro Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alvopetro Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Alvopetro Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canacol Energy and Alvopetro Energy

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

The idea behind Canacol Energy and Alvopetro 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.