Correlation Between Tamarack Valley and Whitecap Resources

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

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

Diversification Opportunities for Tamarack Valley and Whitecap Resources

0.6

Correlation Coefficient

Tamarack Valley  Whitecap Resources

Poor diversification

The 3 months correlation between Tamarack and Whitecap is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tamarack Valley Energy and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap Resources and Tamarack Valley 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 Tamarack Valley Energy are associated (or correlated) with Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of Tamarack Valley i.e., Tamarack Valley and Whitecap Resources go up and down completely randomly.

Pair Corralation between Tamarack Valley and Whitecap Resources

Assuming the 90 days trading horizon Tamarack Valley Energy is expected to generate 1.42 times more return on investment than Whitecap Resources. However, Tamarack Valley is 1.42 times more volatile than Whitecap Resources. It trades about 0.17 of its potential returns per unit of risk. Whitecap Resources is currently generating about -0.04 per unit of risk. If you would invest  415.00  in Tamarack Valley Energy on September 1, 2024 and sell it today you would earn a total of  31.00  from holding Tamarack Valley Energy or generate 7.47% return on investment over 90 days.

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

Tamarack Valley Energy  vs.  Whitecap Resources

Tamarack Valley Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tamarack Valley Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tamarack Valley displayed solid returns over the last few months and may actually be approaching a breakup point.

Whitecap Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Whitecap Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Whitecap Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tamarack Valley and Whitecap Resources

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

The idea behind Tamarack Valley Energy and Whitecap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .