Correlation Between Trican Well and NuVista Energy

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

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

Diversification Opportunities for Trican Well and NuVista Energy

0.52

Correlation Coefficient

Trican Well  NuVista Energy

Very weak diversification

The 3 months correlation between Trican and NuVista is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Trican Well Service and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista Energy and Trican Well 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 Trican Well Service are associated (or correlated) with NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of Trican Well i.e., Trican Well and NuVista Energy go up and down completely randomly.

Pair Corralation between Trican Well and NuVista Energy

Assuming the 90 days trading horizon Trican Well Service is expected to generate 1.06 times more return on investment than NuVista Energy. However, Trican Well is 1.06 times more volatile than NuVista Energy. It trades about 0.05 of its potential returns per unit of risk. NuVista Energy is currently generating about 0.05 per unit of risk. If you would invest  386.00  in Trican Well Service on August 31, 2024 and sell it today you would earn a total of  98.00  from holding Trican Well Service or generate 25.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Trican Well Service  vs.  NuVista Energy

Trican Well Service

Risk-Adjusted Performance

0 of 100

Very Weak

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

NuVista Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NuVista Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, NuVista Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Trican Well and NuVista Energy

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

The idea behind Trican Well Service and NuVista 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.