Correlation Between Trican Well and High Arctic

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

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

Diversification Opportunities for Trican Well and High Arctic

0.51

Correlation Coefficient

Trican Well  High Arctic

Very weak diversification

The 3 months correlation between Trican and High is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Trican Well Service and High Arctic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Arctic Energy and Trican Well 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 Trican Well Service are associated (or correlated) with High Arctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Arctic Energy has no effect on the direction of Trican Well i.e., Trican Well and High Arctic go up and down completely randomly.

Pair Corralation between Trican Well and High Arctic

Assuming the 90 days horizon Trican Well is expected to generate 85.96 times less return on investment than High Arctic. But when comparing it to its historical volatility, Trican Well Service is 21.58 times less risky than High Arctic. It trades about 0.04 of its potential returns per unit of risk. High Arctic Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  302.00  in High Arctic Energy on September 3, 2024 and sell it today you would lose (221.00) from holding High Arctic Energy or give up 73.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.08%
Values	Daily Returns

Trican Well Service  vs.  High Arctic Energy

Trican Well Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trican Well Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Trican Well is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

High Arctic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Arctic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Trican Well and High Arctic

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

The idea behind Trican Well Service and High Arctic 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.