Correlation Between Prairie Provident and Sintana Energy

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

Diversification Opportunities for Prairie Provident and Sintana Energy

0.6

Correlation Coefficient

Prairie Provident  Sintana Energy

Poor diversification

The 3 months correlation between Prairie and Sintana is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources and Sintana Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sintana 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 Sintana Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sintana Energy has no effect on the direction of Prairie Provident i.e., Prairie Provident and Sintana Energy go up and down completely randomly.

Pair Corralation between Prairie Provident and Sintana Energy

Assuming the 90 days horizon Prairie Provident Resources is expected to generate 1.75 times more return on investment than Sintana Energy. However, Prairie Provident is 1.75 times more volatile than Sintana Energy. It trades about 0.13 of its potential returns per unit of risk. Sintana Energy is currently generating about 0.22 per unit of risk. If you would invest  1.79  in Prairie Provident Resources on September 18, 2024 and sell it today you would earn a total of  0.31  from holding Prairie Provident Resources or generate 17.32% return on investment over 90 days.

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

Prairie Provident Resources  vs.  Sintana Energy

Prairie Provident

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prairie Provident reported solid returns over the last few months and may actually be approaching a breakup point.

Sintana Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sintana Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sintana Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prairie Provident and Sintana Energy

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

The idea behind Prairie Provident Resources and Sintana 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.