Correlation Between Foothills Exploration and Barrel Energy

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

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

Diversification Opportunities for Foothills Exploration and Barrel Energy

0.0

Correlation Coefficient

Foothills Exploration  Barrel Energy

Pay attention - limited upside

The 3 months correlation between Foothills and Barrel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Foothills Exploration and Barrel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrel Energy and Foothills Exploration 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 Foothills Exploration are associated (or correlated) with Barrel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrel Energy has no effect on the direction of Foothills Exploration i.e., Foothills Exploration and Barrel Energy go up and down completely randomly.

Pair Corralation between Foothills Exploration and Barrel Energy

Given the investment horizon of 90 days Foothills Exploration is expected to generate 2.4 times more return on investment than Barrel Energy. However, Foothills Exploration is 2.4 times more volatile than Barrel Energy. It trades about 0.12 of its potential returns per unit of risk. Barrel Energy is currently generating about 0.0 per unit of risk. If you would invest  0.02  in Foothills Exploration on September 24, 2024 and sell it today you would lose (0.01) from holding Foothills Exploration or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Foothills Exploration  vs.  Barrel Energy

Foothills Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Barrel Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrel Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Barrel Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Foothills Exploration and Barrel Energy

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

The idea behind Foothills Exploration and Barrel 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.