Correlation Between Tourmaline Oil and Birchcliff Energy

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

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

Diversification Opportunities for Tourmaline Oil and Birchcliff Energy

-0.22

Correlation Coefficient

Tourmaline Oil  Birchcliff Energy

Very good diversification

The 3 months correlation between Tourmaline and Birchcliff is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tourmaline Oil Corp and Birchcliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchcliff Energy and Tourmaline Oil 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 Tourmaline Oil Corp are associated (or correlated) with Birchcliff Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchcliff Energy has no effect on the direction of Tourmaline Oil i.e., Tourmaline Oil and Birchcliff Energy go up and down completely randomly.

Pair Corralation between Tourmaline Oil and Birchcliff Energy

Assuming the 90 days trading horizon Tourmaline Oil Corp is expected to generate 0.83 times more return on investment than Birchcliff Energy. However, Tourmaline Oil Corp is 1.2 times less risky than Birchcliff Energy. It trades about 0.11 of its potential returns per unit of risk. Birchcliff Energy is currently generating about -0.04 per unit of risk. If you would invest  5,834  in Tourmaline Oil Corp on September 3, 2024 and sell it today you would earn a total of  690.00  from holding Tourmaline Oil Corp or generate 11.83% return on investment over 90 days.

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

Tourmaline Oil Corp  vs.  Birchcliff Energy

Tourmaline Oil Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tourmaline Oil Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Tourmaline Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Birchcliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birchcliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Birchcliff Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tourmaline Oil and Birchcliff Energy

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

The idea behind Tourmaline Oil Corp and Birchcliff 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.