Correlation Between Sherritt International and Bonterra Energy

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

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

Diversification Opportunities for Sherritt International and Bonterra Energy

0.36

Correlation Coefficient

Sherritt International  Bonterra Energy

Weak diversification

The 3 months correlation between Sherritt and Bonterra is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sherritt International and Bonterra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonterra Energy Corp and Sherritt International 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 Sherritt International are associated (or correlated) with Bonterra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonterra Energy Corp has no effect on the direction of Sherritt International i.e., Sherritt International and Bonterra Energy go up and down completely randomly.

Pair Corralation between Sherritt International and Bonterra Energy

Assuming the 90 days horizon Sherritt International is expected to generate 5.83 times more return on investment than Bonterra Energy. However, Sherritt International is 5.83 times more volatile than Bonterra Energy Corp. It trades about 0.03 of its potential returns per unit of risk. Bonterra Energy Corp is currently generating about -0.06 per unit of risk. If you would invest  15.00  in Sherritt International on September 29, 2024 and sell it today you would lose (4.00) from holding Sherritt International or give up 26.67% of portfolio value over 90 days.

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

Sherritt International  vs.  Bonterra Energy Corp

Sherritt International

Risk-Adjusted Performance

2 of 100

Weak

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

Bonterra Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonterra Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sherritt International and Bonterra Energy

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

The idea behind Sherritt International and Bonterra Energy Corp 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.