Correlation Between Tourmaline Oil and Paramount Resources

Can any of the company-specific risk be diversified away by investing in both Tourmaline Oil and Paramount Resources 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 Paramount Resources 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 Paramount Resources, you can compare the effects of market volatilities on Tourmaline Oil and Paramount Resources 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 Paramount Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tourmaline Oil and Paramount Resources.

Diversification Opportunities for Tourmaline Oil and Paramount Resources

0.67

Correlation Coefficient

Tourmaline Oil  Paramount Resources

Poor diversification

The 3 months correlation between Tourmaline and Paramount is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tourmaline Oil Corp and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources 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 Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Tourmaline Oil i.e., Tourmaline Oil and Paramount Resources go up and down completely randomly.

Pair Corralation between Tourmaline Oil and Paramount Resources

Assuming the 90 days trading horizon Tourmaline Oil is expected to generate 2.51 times less return on investment than Paramount Resources. But when comparing it to its historical volatility, Tourmaline Oil Corp is 1.39 times less risky than Paramount Resources. It trades about 0.08 of its potential returns per unit of risk. Paramount Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,495  in Paramount Resources on September 16, 2024 and sell it today you would earn a total of  555.00  from holding Paramount Resources or generate 22.24% return on investment over 90 days.

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

Tourmaline Oil Corp  vs.  Paramount Resources

Tourmaline Oil Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tourmaline Oil Corp are ranked lower than 6 (%) 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.

Paramount Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Paramount Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tourmaline Oil and Paramount Resources

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

The idea behind Tourmaline Oil Corp and Paramount Resources 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.