Correlation Between Invictus Energy and Bonterra Energy

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

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

Diversification Opportunities for Invictus Energy and Bonterra Energy

0.72

Correlation Coefficient

Invictus Energy  Bonterra Energy

Poor diversification

The 3 months correlation between Invictus and Bonterra is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invictus Energy Limited and Bonterra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonterra Energy Corp and Invictus 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 Invictus Energy Limited are associated (or correlated) with Bonterra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonterra Energy Corp has no effect on the direction of Invictus Energy i.e., Invictus Energy and Bonterra Energy go up and down completely randomly.

Pair Corralation between Invictus Energy and Bonterra Energy

Assuming the 90 days horizon Invictus Energy Limited is expected to generate 2.77 times more return on investment than Bonterra Energy. However, Invictus Energy is 2.77 times more volatile than Bonterra Energy Corp. It trades about 0.04 of its potential returns per unit of risk. Bonterra Energy Corp is currently generating about -0.14 per unit of risk. If you would invest  4.13  in Invictus Energy Limited on September 30, 2024 and sell it today you would earn a total of  0.37  from holding Invictus Energy Limited or generate 8.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Invictus Energy Limited  vs.  Bonterra Energy Corp

Invictus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bonterra Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonterra Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Invictus Energy and Bonterra Energy

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

The idea behind Invictus Energy Limited and Bonterra Energy 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.