Correlation Between Parex Resources and Bonterra Energy

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

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

Diversification Opportunities for Parex Resources and Bonterra Energy

0.74

Correlation Coefficient

Parex Resources  Bonterra Energy

Poor diversification

The 3 months correlation between Parex and Bonterra is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Parex Resources 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 Parex 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 Parex Resources 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 Parex Resources i.e., Parex Resources and Bonterra Energy go up and down completely randomly.

Pair Corralation between Parex Resources and Bonterra Energy

Assuming the 90 days horizon Parex Resources is expected to generate 4.13 times less return on investment than Bonterra Energy. But when comparing it to its historical volatility, Parex Resources is 1.05 times less risky than Bonterra Energy. It trades about 0.01 of its potential returns per unit of risk. Bonterra Energy Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  249.00  in Bonterra Energy Corp on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Bonterra Energy Corp or generate 1.2% return on investment over 90 days.

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

Parex Resources  vs.  Bonterra Energy Corp

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.

Bonterra Energy Corp

Risk-Adjusted Performance

Weak

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

Pair Trading with Parex Resources and Bonterra Energy

The main advantage of trading using opposite Parex Resources and Bonterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parex Resources 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 Parex Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.