Correlation Between Valeura Energy and Mountain Province

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

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

Diversification Opportunities for Valeura Energy and Mountain Province

-0.72

Correlation Coefficient

Valeura Energy  Mountain Province

Pay attention - limited upside

The 3 months correlation between Valeura and Mountain is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy and Mountain Province Diamonds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Province and Valeura Energy 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 Valeura Energy are associated (or correlated) with Mountain Province. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Province has no effect on the direction of Valeura Energy i.e., Valeura Energy and Mountain Province go up and down completely randomly.

Pair Corralation between Valeura Energy and Mountain Province

Assuming the 90 days trading horizon Valeura Energy is expected to generate 0.62 times more return on investment than Mountain Province. However, Valeura Energy is 1.62 times less risky than Mountain Province. It trades about 0.1 of its potential returns per unit of risk. Mountain Province Diamonds is currently generating about -0.04 per unit of risk. If you would invest  459.00  in Valeura Energy on September 30, 2024 and sell it today you would earn a total of  203.00  from holding Valeura Energy or generate 44.23% return on investment over 90 days.

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

Valeura Energy  vs.  Mountain Province Diamonds

Valeura Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Valeura Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Mountain Province

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Province Diamonds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Valeura Energy and Mountain Province

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

The idea behind Valeura Energy and Mountain Province Diamonds 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 Valuation module to check real value of public entities based on technical and fundamental data.