Correlation Between Crown Point and Cardinal Energy

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

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

Diversification Opportunities for Crown Point and Cardinal Energy

0.16

Correlation Coefficient

Crown Point  Cardinal Energy

Average diversification

The 3 months correlation between Crown and Cardinal is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Crown Point Energy and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Energy and Crown Point 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 Crown Point Energy are associated (or correlated) with Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of Crown Point i.e., Crown Point and Cardinal Energy go up and down completely randomly.

Pair Corralation between Crown Point and Cardinal Energy

Assuming the 90 days horizon Crown Point Energy is expected to generate 10.27 times more return on investment than Cardinal Energy. However, Crown Point is 10.27 times more volatile than Cardinal Energy. It trades about 0.06 of its potential returns per unit of risk. Cardinal Energy is currently generating about -0.03 per unit of risk. If you would invest  4.00  in Crown Point Energy on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Crown Point Energy or generate 0.0% return on investment over 90 days.

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

Crown Point Energy  vs.  Cardinal Energy

Crown Point Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Point Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Crown Point reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Crown Point and Cardinal Energy

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

The idea behind Crown Point Energy and Cardinal 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.