Correlation Between Pine Cliff and McChip Resources

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

Diversification Opportunities for Pine Cliff and McChip Resources

-0.71

Correlation Coefficient

Pine Cliff  McChip Resources

Pay attention - limited upside

The 3 months correlation between Pine and McChip is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and McChip Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McChip Resources 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 McChip Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McChip Resources has no effect on the direction of Pine Cliff i.e., Pine Cliff and McChip Resources go up and down completely randomly.

Pair Corralation between Pine Cliff and McChip Resources

Assuming the 90 days trading horizon Pine Cliff Energy is expected to generate 0.74 times more return on investment than McChip Resources. However, Pine Cliff Energy is 1.34 times less risky than McChip Resources. It trades about 0.07 of its potential returns per unit of risk. McChip Resources is currently generating about 0.02 per unit of risk. If you would invest  83.00  in Pine Cliff Energy on September 15, 2024 and sell it today you would earn a total of  3.00  from holding Pine Cliff Energy or generate 3.61% return on investment over 90 days.

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

Pine Cliff Energy  vs.  McChip Resources

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

McChip Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in McChip Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, McChip Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pine Cliff and McChip Resources

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

The idea behind Pine Cliff Energy and McChip 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.