Correlation Between Yellow Pages and Birchcliff Energy

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

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

Diversification Opportunities for Yellow Pages and Birchcliff Energy

-0.72

Correlation Coefficient

Yellow Pages  Birchcliff Energy

Pay attention - limited upside

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

Pair Corralation between Yellow Pages and Birchcliff Energy

Given the investment horizon of 90 days Yellow Pages Limited is expected to generate 1.1 times more return on investment than Birchcliff Energy. However, Yellow Pages is 1.1 times more volatile than Birchcliff Energy. It trades about 0.04 of its potential returns per unit of risk. Birchcliff Energy is currently generating about -0.39 per unit of risk. If you would invest  1,119  in Yellow Pages Limited on September 22, 2024 and sell it today you would earn a total of  12.00  from holding Yellow Pages Limited or generate 1.07% return on investment over 90 days.

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

Yellow Pages Limited  vs.  Birchcliff Energy

Yellow Pages Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Pages Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Yellow Pages displayed solid returns over the last few months and may actually be approaching a breakup point.

Birchcliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birchcliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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 Yellow Pages and Birchcliff Energy

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

The idea behind Yellow Pages Limited and Birchcliff 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.