Correlation Between True North and Continental Energy

Can any of the company-specific risk be diversified away by investing in both True North and Continental 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 Continental 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 Continental Energy, you can compare the effects of market volatilities on True North and Continental 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 Continental Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of True North and Continental Energy.

Diversification Opportunities for True North and Continental Energy

1.0

Correlation Coefficient

True North  Continental Energy

No risk reduction

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

Pair Corralation between True North and Continental Energy

If you would invest  0.01  in Continental Energy on October 21, 2024 and sell it today you would earn a total of  0.00  from holding Continental Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	1.61%
Values	Daily Returns

True North Energy  vs.  Continental Energy

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.

Continental Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Continental Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Continental 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 Continental Energy

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

The idea behind True North Energy and Continental 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.