Correlation Between Mountain Province and Bonterra Energy

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

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

Diversification Opportunities for Mountain Province and Bonterra Energy

0.75

Correlation Coefficient

Mountain Province  Bonterra Energy

Poor diversification

The 3 months correlation between Mountain and Bonterra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Province Diamonds 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 Mountain Province 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 Mountain Province Diamonds 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 Mountain Province i.e., Mountain Province and Bonterra Energy go up and down completely randomly.

Pair Corralation between Mountain Province and Bonterra Energy

Assuming the 90 days trading horizon Mountain Province Diamonds is expected to under-perform the Bonterra Energy. In addition to that, Mountain Province is 2.07 times more volatile than Bonterra Energy Corp. It trades about -0.08 of its total potential returns per unit of risk. Bonterra Energy Corp is currently generating about -0.06 per unit of volatility. If you would invest  271.00  in Bonterra Energy Corp on September 29, 2024 and sell it today you would lose (32.00) from holding Bonterra Energy Corp or give up 11.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Mountain Province Diamonds  vs.  Bonterra Energy Corp

Mountain Province

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Province Diamonds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 Mountain Province and Bonterra Energy

The main advantage of trading using opposite Mountain Province and Bonterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mountain Province 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 Mountain Province Diamonds 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.