Correlation Between Ovintiv and Baytex Energy

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

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

Diversification Opportunities for Ovintiv and Baytex Energy

0.15

Correlation Coefficient

Ovintiv  Baytex Energy

Average diversification

The 3 months correlation between Ovintiv and Baytex is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ovintiv 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 Ovintiv 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 Ovintiv 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 Ovintiv i.e., Ovintiv and Baytex Energy go up and down completely randomly.

Pair Corralation between Ovintiv and Baytex Energy

Considering the 90-day investment horizon Ovintiv is expected to generate 0.93 times more return on investment than Baytex Energy. However, Ovintiv is 1.07 times less risky than Baytex Energy. It trades about 0.08 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  4,099  in Ovintiv on September 1, 2024 and sell it today you would earn a total of  443.00  from holding Ovintiv or generate 10.81% return on investment over 90 days.

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

Ovintiv  vs.  Baytex Energy Corp

Ovintiv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Ovintiv may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 Ovintiv and Baytex Energy

The main advantage of trading using opposite Ovintiv and Baytex Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ovintiv 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 Ovintiv 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.