Correlation Between Whitecap Resources and Tamarack Valley

Can any of the company-specific risk be diversified away by investing in both Whitecap Resources and Tamarack Valley 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 Whitecap Resources and Tamarack Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Whitecap Resources and Tamarack Valley

0.86

Correlation Coefficient

Whitecap Resources  Tamarack Valley

Very poor diversification

The 3 months correlation between Whitecap and Tamarack is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Whitecap Resources and Tamarack Valley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamarack Valley Energy and Whitecap Resources 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 Whitecap Resources are associated (or correlated) with Tamarack Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamarack Valley Energy has no effect on the direction of Whitecap Resources i.e., Whitecap Resources and Tamarack Valley go up and down completely randomly.

Pair Corralation between Whitecap Resources and Tamarack Valley

Assuming the 90 days horizon Whitecap Resources is expected to generate 1.28 times more return on investment than Tamarack Valley. However, Whitecap Resources is 1.28 times more volatile than Tamarack Valley Energy. It trades about -0.03 of its potential returns per unit of risk. Tamarack Valley Energy is currently generating about -0.05 per unit of risk. If you would invest  692.00  in Whitecap Resources on December 30, 2024 and sell it today you would lose (43.00) from holding Whitecap Resources or give up 6.21% of portfolio value over 90 days.

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

Whitecap Resources  vs.  Tamarack Valley Energy

Whitecap Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whitecap Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Whitecap Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tamarack Valley Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tamarack Valley Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic 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 Whitecap Resources and Tamarack Valley

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

The idea behind Whitecap Resources and Tamarack Valley 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.