Correlation Between Pine Cliff and VVC Exploration

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

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

Diversification Opportunities for Pine Cliff and VVC Exploration

0.16

Correlation Coefficient

Pine Cliff  VVC Exploration

Average diversification

The 3 months correlation between Pine and VVC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and VVC Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VVC Exploration Corp and Pine Cliff 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 Pine Cliff Energy are associated (or correlated) with VVC Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VVC Exploration Corp has no effect on the direction of Pine Cliff i.e., Pine Cliff and VVC Exploration go up and down completely randomly.

Pair Corralation between Pine Cliff and VVC Exploration

Assuming the 90 days trading horizon Pine Cliff Energy is expected to under-perform the VVC Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Pine Cliff Energy is 3.45 times less risky than VVC Exploration. The stock trades about -0.11 of its potential returns per unit of risk. The VVC Exploration Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.00  in VVC Exploration Corp on September 19, 2024 and sell it today you would earn a total of  0.00  from holding VVC Exploration Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Pine Cliff Energy  vs.  VVC Exploration Corp

Pine Cliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pine Cliff Energy 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 technical and fundamental 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.

VVC Exploration Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VVC Exploration Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, VVC Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pine Cliff and VVC Exploration

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

The idea behind Pine Cliff Energy and VVC Exploration 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.