Correlation Between Peyto ExplorationDevel and ARC Resources

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

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

Diversification Opportunities for Peyto ExplorationDevel and ARC Resources

0.87

Correlation Coefficient

Peyto ExplorationDevel  ARC Resources

Very poor diversification

The 3 months correlation between Peyto and ARC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Peyto ExplorationDevelopment C and ARC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Resources and Peyto ExplorationDevel 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 Peyto ExplorationDevelopment Corp are associated (or correlated) with ARC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Resources has no effect on the direction of Peyto ExplorationDevel i.e., Peyto ExplorationDevel and ARC Resources go up and down completely randomly.

Pair Corralation between Peyto ExplorationDevel and ARC Resources

Assuming the 90 days trading horizon Peyto ExplorationDevel is expected to generate 1.17 times less return on investment than ARC Resources. But when comparing it to its historical volatility, Peyto ExplorationDevelopment Corp is 1.16 times less risky than ARC Resources. It trades about 0.1 of its potential returns per unit of risk. ARC Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,583  in ARC Resources on December 28, 2024 and sell it today you would earn a total of  272.00  from holding ARC Resources or generate 10.53% return on investment over 90 days.

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

Peyto ExplorationDevelopment C  vs.  ARC Resources

Peyto ExplorationDevel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peyto ExplorationDevelopment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Peyto ExplorationDevel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ARC Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARC Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ARC Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Peyto ExplorationDevel and ARC Resources

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

The idea behind Peyto ExplorationDevelopment Corp and ARC 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.