Correlation Between ECN Capital and Advantage Oil

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

By analyzing existing cross correlation between ECN Capital Corp and Advantage Oil Gas, you can compare the effects of market volatilities on ECN Capital and Advantage Oil 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 ECN Capital with a short position of Advantage Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECN Capital and Advantage Oil.

Diversification Opportunities for ECN Capital and Advantage Oil

-0.22

Correlation Coefficient

ECN Capital  Advantage Oil

Very good diversification

The 3 months correlation between ECN and Advantage is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding ECN Capital Corp and Advantage Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Oil Gas and ECN Capital 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 ECN Capital Corp are associated (or correlated) with Advantage Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Oil Gas has no effect on the direction of ECN Capital i.e., ECN Capital and Advantage Oil go up and down completely randomly.

Pair Corralation between ECN Capital and Advantage Oil

Assuming the 90 days trading horizon ECN Capital Corp is expected to generate 1.76 times more return on investment than Advantage Oil. However, ECN Capital is 1.76 times more volatile than Advantage Oil Gas. It trades about 0.04 of its potential returns per unit of risk. Advantage Oil Gas is currently generating about 0.02 per unit of risk. If you would invest  230.00  in ECN Capital Corp on October 4, 2024 and sell it today you would earn a total of  86.00  from holding ECN Capital Corp or generate 37.39% return on investment over 90 days.

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

ECN Capital Corp  vs.  Advantage Oil Gas

ECN Capital Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECN Capital Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ECN Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Advantage Oil Gas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Oil Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Advantage Oil is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ECN Capital and Advantage Oil

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

The idea behind ECN Capital Corp and Advantage Oil Gas 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.