Correlation Between CNX Resources and Baytex Energy

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

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

Diversification Opportunities for CNX Resources and Baytex Energy

-0.46

Correlation Coefficient

CNX Resources  Baytex Energy

Very good diversification

The 3 months correlation between CNX and Baytex is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CNX Resources Corp and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp and CNX 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 CNX Resources Corp are associated (or correlated) with Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of CNX Resources i.e., CNX Resources and Baytex Energy go up and down completely randomly.

Pair Corralation between CNX Resources and Baytex Energy

Considering the 90-day investment horizon CNX Resources Corp is expected to generate 0.9 times more return on investment than Baytex Energy. However, CNX Resources Corp is 1.11 times less risky than Baytex Energy. It trades about 0.28 of its potential returns per unit of risk. Baytex Energy Corp is currently generating about -0.08 per unit of risk. If you would invest  2,712  in CNX Resources Corp on September 3, 2024 and sell it today you would earn a total of  1,235  from holding CNX Resources Corp or generate 45.54% return on investment over 90 days.

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

CNX Resources Corp  vs.  Baytex Energy Corp

CNX Resources Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CNX Resources Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CNX Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Baytex Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baytex Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CNX Resources and Baytex Energy

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

The idea behind CNX Resources Corp and Baytex Energy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.