Correlation Between Whitecap Resources and Cardinal Energy

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

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

Diversification Opportunities for Whitecap Resources and Cardinal Energy

0.4

Correlation Coefficient

Whitecap Resources  Cardinal Energy

Very weak diversification

The 3 months correlation between Whitecap and Cardinal is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Whitecap Resources and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal 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 Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of Whitecap Resources i.e., Whitecap Resources and Cardinal Energy go up and down completely randomly.

Pair Corralation between Whitecap Resources and Cardinal Energy

Assuming the 90 days trading horizon Whitecap Resources is expected to generate 1.57 times more return on investment than Cardinal Energy. However, Whitecap Resources is 1.57 times more volatile than Cardinal Energy. It trades about 0.05 of its potential returns per unit of risk. Cardinal Energy is currently generating about 0.02 per unit of risk. If you would invest  984.00  in Whitecap Resources on September 1, 2024 and sell it today you would earn a total of  39.00  from holding Whitecap Resources or generate 3.96% return on investment over 90 days.

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

Whitecap Resources  vs.  Cardinal Energy

Whitecap Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Whitecap Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Whitecap Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cardinal Energy

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cardinal Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Whitecap Resources and Cardinal Energy

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

The idea behind Whitecap Resources and Cardinal 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.