Correlation Between Pine Cliff and EnQuest PLC

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

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

Diversification Opportunities for Pine Cliff and EnQuest PLC

0.28

Correlation Coefficient

Pine Cliff  EnQuest PLC

Modest diversification

The 3 months correlation between Pine and EnQuest is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and EnQuest PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnQuest PLC and Pine Cliff 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 Pine Cliff Energy are associated (or correlated) with EnQuest PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnQuest PLC has no effect on the direction of Pine Cliff i.e., Pine Cliff and EnQuest PLC go up and down completely randomly.

Pair Corralation between Pine Cliff and EnQuest PLC

Assuming the 90 days horizon Pine Cliff Energy is expected to under-perform the EnQuest PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pine Cliff Energy is 3.35 times less risky than EnQuest PLC. The pink sheet trades about -0.21 of its potential returns per unit of risk. The EnQuest PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  14.00  in EnQuest PLC on December 2, 2024 and sell it today you would earn a total of  2.00  from holding EnQuest PLC or generate 14.29% return on investment over 90 days.

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

Pine Cliff Energy  vs.  EnQuest PLC

Pine Cliff Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pine Cliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

EnQuest PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EnQuest PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EnQuest PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pine Cliff and EnQuest PLC

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

The idea behind Pine Cliff Energy and EnQuest PLC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.