Correlation Between NuVista Energy and Parex Resources

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

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

Diversification Opportunities for NuVista Energy and Parex Resources

0.68

Correlation Coefficient

NuVista Energy  Parex Resources

Poor diversification

The 3 months correlation between NuVista and Parex is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NuVista Energy and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources and NuVista 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 NuVista Energy are associated (or correlated) with Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of NuVista Energy i.e., NuVista Energy and Parex Resources go up and down completely randomly.

Pair Corralation between NuVista Energy and Parex Resources

Assuming the 90 days horizon NuVista Energy is expected to generate 0.96 times more return on investment than Parex Resources. However, NuVista Energy is 1.04 times less risky than Parex Resources. It trades about 0.01 of its potential returns per unit of risk. Parex Resources is currently generating about 0.01 per unit of risk. If you would invest  946.00  in NuVista Energy on December 29, 2024 and sell it today you would earn a total of  4.00  from holding NuVista Energy or generate 0.42% return on investment over 90 days.

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

NuVista Energy  vs.  Parex Resources

NuVista Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NuVista Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NuVista Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Parex Resources

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NuVista Energy and Parex Resources

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

The idea behind NuVista Energy and Parex Resources 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.