Correlation Between Bonterra Energy and InPlay Oil

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

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

Diversification Opportunities for Bonterra Energy and InPlay Oil

0.83

Correlation Coefficient

Bonterra Energy  InPlay Oil

Very poor diversification

The 3 months correlation between Bonterra and InPlay is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bonterra Energy Corp and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp and Bonterra 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 Bonterra Energy Corp are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Bonterra Energy i.e., Bonterra Energy and InPlay Oil go up and down completely randomly.

Pair Corralation between Bonterra Energy and InPlay Oil

Assuming the 90 days trading horizon Bonterra Energy Corp is expected to generate 1.17 times more return on investment than InPlay Oil. However, Bonterra Energy is 1.17 times more volatile than InPlay Oil Corp. It trades about -0.05 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.11 per unit of risk. If you would invest  366.00  in Bonterra Energy Corp on September 11, 2024 and sell it today you would lose (31.00) from holding Bonterra Energy Corp or give up 8.47% of portfolio value over 90 days.

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

Bonterra Energy Corp  vs.  InPlay Oil Corp

Bonterra Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonterra Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp 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 Bonterra Energy and InPlay Oil

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

The idea behind Bonterra Energy Corp and InPlay Oil Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.