Correlation Between Cardinal Energy and Pine Cliff

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

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

Diversification Opportunities for Cardinal Energy and Pine Cliff

0.5

Correlation Coefficient

Cardinal Energy  Pine Cliff

Very weak diversification

The 3 months correlation between Cardinal and Pine is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Energy and Pine Cliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pine Cliff Energy and Cardinal 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 Cardinal Energy are associated (or correlated) with Pine Cliff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pine Cliff Energy has no effect on the direction of Cardinal Energy i.e., Cardinal Energy and Pine Cliff go up and down completely randomly.

Pair Corralation between Cardinal Energy and Pine Cliff

Assuming the 90 days horizon Cardinal Energy is expected to generate 0.68 times more return on investment than Pine Cliff. However, Cardinal Energy is 1.47 times less risky than Pine Cliff. It trades about 0.01 of its potential returns per unit of risk. Pine Cliff Energy is currently generating about -0.19 per unit of risk. If you would invest  451.00  in Cardinal Energy on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Cardinal Energy or generate 0.0% return on investment over 90 days.

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

Cardinal Energy  vs.  Pine Cliff Energy

Cardinal Energy

Risk-Adjusted Performance

Very Weak

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

Pine Cliff Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pine Cliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cardinal Energy and Pine Cliff

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

The idea behind Cardinal Energy and Pine Cliff 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.