Correlation Between Pine Cliff and Tamarack Valley

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

Diversification Opportunities for Pine Cliff and Tamarack Valley

-0.48

Correlation Coefficient

Pine Cliff  Tamarack Valley

Very good diversification

The 3 months correlation between Pine and Tamarack is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and Tamarack Valley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamarack Valley 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 Tamarack Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamarack Valley Energy has no effect on the direction of Pine Cliff i.e., Pine Cliff and Tamarack Valley go up and down completely randomly.

Pair Corralation between Pine Cliff and Tamarack Valley

Assuming the 90 days trading horizon Pine Cliff is expected to generate 9.59 times less return on investment than Tamarack Valley. In addition to that, Pine Cliff is 1.11 times more volatile than Tamarack Valley Energy. It trades about 0.01 of its total potential returns per unit of risk. Tamarack Valley Energy is currently generating about 0.14 per unit of volatility. If you would invest  372.00  in Tamarack Valley Energy on September 5, 2024 and sell it today you would earn a total of  76.00  from holding Tamarack Valley Energy or generate 20.43% return on investment over 90 days.

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

Pine Cliff Energy  vs.  Tamarack Valley Energy

Pine Cliff Energy

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pine Cliff Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Pine Cliff is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Tamarack Valley Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tamarack Valley Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tamarack Valley displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pine Cliff and Tamarack Valley

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

The idea behind Pine Cliff Energy and Tamarack Valley 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.