Correlation Between True North and BPI Energy

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

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

Diversification Opportunities for True North and BPI Energy

1.0

Correlation Coefficient

True North  BPI Energy

No risk reduction

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

Pair Corralation between True North and BPI Energy

If you would invest  0.01  in BPI Energy Holdings on September 13, 2024 and sell it today you would earn a total of  0.00  from holding BPI Energy Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	1.59%
Values	Daily Returns

True North Energy  vs.  BPI Energy Holdings

True North Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

BPI Energy Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with True North and BPI Energy

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

The idea behind True North Energy and BPI Energy Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.