Correlation Between Prairie Provident and Canacol Energy
Can any of the company-specific risk be diversified away by investing in both Prairie Provident and Canacol 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 Prairie Provident and Canacol Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prairie Provident Resources and Canacol Energy, you can compare the effects of market volatilities on Prairie Provident and Canacol 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 Prairie Provident with a short position of Canacol Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prairie Provident and Canacol Energy.
Diversification Opportunities for Prairie Provident and Canacol Energy
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Prairie and Canacol is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol Energy and Prairie Provident 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 Prairie Provident Resources are associated (or correlated) with Canacol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canacol Energy has no effect on the direction of Prairie Provident i.e., Prairie Provident and Canacol Energy go up and down completely randomly.
Pair Corralation between Prairie Provident and Canacol Energy
Assuming the 90 days horizon Prairie Provident Resources is expected to generate 17.33 times more return on investment than Canacol Energy. However, Prairie Provident is 17.33 times more volatile than Canacol Energy. It trades about 0.18 of its potential returns per unit of risk. Canacol Energy is currently generating about -0.11 per unit of risk. If you would invest 2.13 in Prairie Provident Resources on October 11, 2024 and sell it today you would earn a total of 1.51 from holding Prairie Provident Resources or generate 70.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Prairie Provident Resources vs. Canacol Energy
Performance |
Timeline |
Prairie Provident |
Canacol Energy |
Prairie Provident and Canacol Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Prairie Provident and Canacol Energy
The main advantage of trading using opposite Prairie Provident and Canacol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prairie Provident position performs unexpectedly, Canacol 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 Canacol Energy will offset losses from the drop in Canacol Energy's long position.Prairie Provident vs. San Leon Energy | Prairie Provident vs. Enwell Energy plc | Prairie Provident vs. Dno ASA | Prairie Provident vs. Questerre Energy |
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Check out your portfolio center.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.
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