Correlation Between Roots Corp and Questerre Energy

Can any of the company-specific risk be diversified away by investing in both Roots Corp and Questerre 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 Roots Corp and Questerre Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Roots Corp and Questerre Energy, you can compare the effects of market volatilities on Roots Corp and Questerre 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 Roots Corp with a short position of Questerre Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roots Corp and Questerre Energy.

Diversification Opportunities for Roots Corp and Questerre Energy

-0.3

Correlation Coefficient

Roots Corp  Questerre Energy

Very good diversification

The 3 months correlation between Roots and Questerre is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Roots Corp and Questerre Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Questerre Energy and Roots Corp 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 Roots Corp are associated (or correlated) with Questerre Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Questerre Energy has no effect on the direction of Roots Corp i.e., Roots Corp and Questerre Energy go up and down completely randomly.

Pair Corralation between Roots Corp and Questerre Energy

Assuming the 90 days trading horizon Roots Corp is expected to under-perform the Questerre Energy. But the stock apears to be less risky and, when comparing its historical volatility, Roots Corp is 2.31 times less risky than Questerre Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Questerre Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Questerre Energy on September 4, 2024 and sell it today you would earn a total of  1.00  from holding Questerre Energy or generate 4.55% return on investment over 90 days.

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

Roots Corp  vs.  Questerre Energy

Roots Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roots Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Roots Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Questerre Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Questerre Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Questerre Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roots Corp and Questerre Energy

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

The idea behind Roots Corp and Questerre 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..