Correlation Between Baytex Energy and Trio Petroleum
Can any of the company-specific risk be diversified away by investing in both Baytex Energy and Trio Petroleum 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 Baytex Energy and Trio Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baytex Energy Corp and Trio Petroleum Corp, you can compare the effects of market volatilities on Baytex Energy and Trio Petroleum 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 Baytex Energy with a short position of Trio Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baytex Energy and Trio Petroleum.
Diversification Opportunities for Baytex Energy and Trio Petroleum
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baytex and Trio is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Baytex Energy Corp and Trio Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trio Petroleum Corp and Baytex 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 Baytex Energy Corp are associated (or correlated) with Trio Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trio Petroleum Corp has no effect on the direction of Baytex Energy i.e., Baytex Energy and Trio Petroleum go up and down completely randomly.
Pair Corralation between Baytex Energy and Trio Petroleum
Considering the 90-day investment horizon Baytex Energy Corp is expected to generate 0.39 times more return on investment than Trio Petroleum. However, Baytex Energy Corp is 2.58 times less risky than Trio Petroleum. It trades about -0.12 of its potential returns per unit of risk. Trio Petroleum Corp is currently generating about -0.31 per unit of risk. If you would invest 311.00 in Baytex Energy Corp on September 17, 2024 and sell it today you would lose (61.00) from holding Baytex Energy Corp or give up 19.61% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Baytex Energy Corp vs. Trio Petroleum Corp
Performance |
Timeline |
Baytex Energy Corp |
Trio Petroleum Corp |
Baytex Energy and Trio Petroleum Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Baytex Energy and Trio Petroleum
The main advantage of trading using opposite Baytex Energy and Trio Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baytex Energy position performs unexpectedly, Trio Petroleum 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 Trio Petroleum will offset losses from the drop in Trio Petroleum's long position.The idea behind Baytex Energy Corp and Trio Petroleum 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.Trio Petroleum vs. Catalent | Trio Petroleum vs. Fidus Investment Corp | Trio Petroleum vs. Xtant Medical Holdings | Trio Petroleum vs. Ameriprise Financial |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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