Correlation Between Daybreak Oil and San Juan

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

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

Diversification Opportunities for Daybreak Oil and San Juan

0.61

Correlation Coefficient

Daybreak Oil  San Juan

Poor diversification

The 3 months correlation between Daybreak and San is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Daybreak Oil and and San Juan Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Juan Basin and Daybreak Oil 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 Daybreak Oil and are associated (or correlated) with San Juan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Juan Basin has no effect on the direction of Daybreak Oil i.e., Daybreak Oil and San Juan go up and down completely randomly.

Pair Corralation between Daybreak Oil and San Juan

Given the investment horizon of 90 days Daybreak Oil and is expected to generate 3.21 times more return on investment than San Juan. However, Daybreak Oil is 3.21 times more volatile than San Juan Basin. It trades about 0.13 of its potential returns per unit of risk. San Juan Basin is currently generating about 0.13 per unit of risk. If you would invest  0.01  in Daybreak Oil and on December 17, 2024 and sell it today you would earn a total of  0.01  from holding Daybreak Oil and or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

Daybreak Oil and  vs.  San Juan Basin

Daybreak Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daybreak Oil and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Daybreak Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

San Juan Basin

Risk-Adjusted Performance

OK

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

Pair Trading with Daybreak Oil and San Juan

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

The idea behind Daybreak Oil and and San Juan Basin 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.