Correlation Between Laramide Resources and Valeura Energy

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

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

Diversification Opportunities for Laramide Resources and Valeura Energy

-0.6

Correlation Coefficient

Laramide Resources  Valeura Energy

Excellent diversification

The 3 months correlation between Laramide and Valeura is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Laramide Resources and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy and Laramide Resources 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 Laramide Resources are associated (or correlated) with Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Laramide Resources i.e., Laramide Resources and Valeura Energy go up and down completely randomly.

Pair Corralation between Laramide Resources and Valeura Energy

Assuming the 90 days horizon Laramide Resources is expected to generate 11.82 times less return on investment than Valeura Energy. In addition to that, Laramide Resources is 1.17 times more volatile than Valeura Energy. It trades about 0.01 of its total potential returns per unit of risk. Valeura Energy is currently generating about 0.09 per unit of volatility. If you would invest  226.00  in Valeura Energy on October 3, 2024 and sell it today you would earn a total of  250.00  from holding Valeura Energy or generate 110.62% return on investment over 90 days.

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

Laramide Resources  vs.  Valeura Energy

Laramide Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laramide Resources 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 basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Valeura Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laramide Resources and Valeura Energy

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

The idea behind Laramide Resources and Valeura 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.