Correlation Between Prairie Provident and Westbridge Energy

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

Diversification Opportunities for Prairie Provident and Westbridge Energy

-0.49

Correlation Coefficient

Prairie Provident  Westbridge Energy

Very good diversification

The 3 months correlation between Prairie and Westbridge is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources and Westbridge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westbridge 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 Westbridge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westbridge Energy has no effect on the direction of Prairie Provident i.e., Prairie Provident and Westbridge Energy go up and down completely randomly.

Pair Corralation between Prairie Provident and Westbridge Energy

Assuming the 90 days horizon Prairie Provident Resources is expected to generate 19.19 times more return on investment than Westbridge Energy. However, Prairie Provident is 19.19 times more volatile than Westbridge Energy. It trades about 0.1 of its potential returns per unit of risk. Westbridge Energy is currently generating about 0.02 per unit of risk. If you would invest  2.20  in Prairie Provident Resources on November 28, 2024 and sell it today you would earn a total of  0.60  from holding Prairie Provident Resources or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.33%
Values	Daily Returns

Prairie Provident Resources  vs.  Westbridge Energy

Prairie Provident

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 7 (%) 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.

Westbridge Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westbridge Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Westbridge Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Prairie Provident and Westbridge Energy

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

The idea behind Prairie Provident Resources and Westbridge 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.