Correlation Between PHX Energy and Canacol Energy

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

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

Diversification Opportunities for PHX Energy and Canacol Energy

0.06

Correlation Coefficient

PHX Energy  Canacol Energy

Significant diversification

The 3 months correlation between PHX and Canacol is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol Energy and PHX 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 PHX Energy Services are associated (or correlated) with Canacol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canacol Energy has no effect on the direction of PHX Energy i.e., PHX Energy and Canacol Energy go up and down completely randomly.

Pair Corralation between PHX Energy and Canacol Energy

Assuming the 90 days trading horizon PHX Energy is expected to generate 2.91 times less return on investment than Canacol Energy. But when comparing it to its historical volatility, PHX Energy Services is 1.96 times less risky than Canacol Energy. It trades about 0.05 of its potential returns per unit of risk. Canacol Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  336.00  in Canacol Energy on September 15, 2024 and sell it today you would earn a total of  42.00  from holding Canacol Energy or generate 12.5% return on investment over 90 days.

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

PHX Energy Services  vs.  Canacol Energy

PHX Energy Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Energy Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PHX Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Canacol Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canacol Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Canacol Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PHX Energy and Canacol Energy

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

The idea behind PHX Energy Services and Canacol 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.