Correlation Between Santa Fe and West Canyon

Can any of the company-specific risk be diversified away by investing in both Santa Fe and West Canyon 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 Santa Fe and West Canyon into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Santa Fe and West Canyon

1.0

Correlation Coefficient

Santa Fe  West Canyon

No risk reduction

The 3 months correlation between Santa and West is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Santa Fe Petroleum and West Canyon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Canyon Energy and Santa Fe 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 Santa Fe Petroleum are associated (or correlated) with West Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Canyon Energy has no effect on the direction of Santa Fe i.e., Santa Fe and West Canyon go up and down completely randomly.

Pair Corralation between Santa Fe and West Canyon

If you would invest  0.02  in West Canyon Energy on October 12, 2024 and sell it today you would earn a total of  0.00  from holding West Canyon Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	81.17%
Values	Daily Returns

Santa Fe Petroleum  vs.  West Canyon Energy

Santa Fe Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santa Fe Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Santa Fe is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

West Canyon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Santa Fe and West Canyon

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

The idea behind Santa Fe Petroleum and West Canyon 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.