Correlation Between Pine Cliff and Baytex Energy

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

Diversification Opportunities for Pine Cliff and Baytex Energy

0.53

Correlation Coefficient

Pine Cliff  Baytex Energy

Very weak diversification

The 3 months correlation between Pine and Baytex is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp 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 Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of Pine Cliff i.e., Pine Cliff and Baytex Energy go up and down completely randomly.

Pair Corralation between Pine Cliff and Baytex Energy

Assuming the 90 days trading horizon Pine Cliff Energy is expected to generate 1.02 times more return on investment than Baytex Energy. However, Pine Cliff is 1.02 times more volatile than Baytex Energy Corp. It trades about -0.28 of its potential returns per unit of risk. Baytex Energy Corp is currently generating about -0.52 per unit of risk. If you would invest  92.00  in Pine Cliff Energy on September 22, 2024 and sell it today you would lose (12.00) from holding Pine Cliff Energy or give up 13.04% of portfolio value over 90 days.

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

Pine Cliff Energy  vs.  Baytex Energy Corp

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Baytex Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baytex Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Pine Cliff and Baytex Energy

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

The idea behind Pine Cliff Energy and Baytex 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 CEOs Directory module to screen CEOs from public companies around the world.