Correlation Between Pine Cliff and Birchcliff Energy

Can any of the company-specific risk be diversified away by investing in both Pine Cliff and Birchcliff 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 Pine Cliff and Birchcliff Energy 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 Birchcliff Energy, you can compare the effects of market volatilities on Pine Cliff and Birchcliff 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 Pine Cliff with a short position of Birchcliff Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pine Cliff and Birchcliff Energy.

Diversification Opportunities for Pine Cliff and Birchcliff Energy

0.88

Correlation Coefficient

Pine Cliff  Birchcliff Energy

Very poor diversification

The 3 months correlation between Pine and Birchcliff is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and Birchcliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchcliff Energy 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 Birchcliff Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchcliff Energy has no effect on the direction of Pine Cliff i.e., Pine Cliff and Birchcliff Energy go up and down completely randomly.

Pair Corralation between Pine Cliff and Birchcliff Energy

Assuming the 90 days trading horizon Pine Cliff Energy is expected to generate 1.32 times more return on investment than Birchcliff Energy. However, Pine Cliff is 1.32 times more volatile than Birchcliff Energy. It trades about -0.03 of its potential returns per unit of risk. Birchcliff Energy is currently generating about -0.09 per unit of risk. If you would invest  95.00  in Pine Cliff Energy on September 12, 2024 and sell it today you would lose (6.00) from holding Pine Cliff Energy or give up 6.32% of portfolio value over 90 days.

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

Pine Cliff Energy  vs.  Birchcliff Energy

Pine Cliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pine Cliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Pine Cliff is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Birchcliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birchcliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Pine Cliff and Birchcliff Energy

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

The idea behind Pine Cliff Energy and Birchcliff 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.