Correlation Between Frontera Energy and Athabasca Oil

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

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

Diversification Opportunities for Frontera Energy and Athabasca Oil

0.45

Correlation Coefficient

Frontera Energy  Athabasca Oil

Very weak diversification

The 3 months correlation between Frontera and Athabasca is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Frontera Energy Corp and Athabasca Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athabasca Oil Corp and Frontera 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 Frontera Energy Corp are associated (or correlated) with Athabasca Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athabasca Oil Corp has no effect on the direction of Frontera Energy i.e., Frontera Energy and Athabasca Oil go up and down completely randomly.

Pair Corralation between Frontera Energy and Athabasca Oil

Assuming the 90 days horizon Frontera Energy Corp is expected to under-perform the Athabasca Oil. In addition to that, Frontera Energy is 1.1 times more volatile than Athabasca Oil Corp. It trades about -0.11 of its total potential returns per unit of risk. Athabasca Oil Corp is currently generating about 0.06 per unit of volatility. If you would invest  359.00  in Athabasca Oil Corp on December 30, 2024 and sell it today you would earn a total of  26.00  from holding Athabasca Oil Corp or generate 7.24% return on investment over 90 days.

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

Frontera Energy Corp  vs.  Athabasca Oil Corp

Frontera Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frontera Energy Corp 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 fundamental 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.

Athabasca Oil Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Athabasca Oil Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Athabasca Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Frontera Energy and Athabasca Oil

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

The idea behind Frontera Energy Corp and Athabasca Oil Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.