Correlation Between Whitecap Resources and Baytex Energy

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

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

Diversification Opportunities for Whitecap Resources and Baytex Energy

0.29

Correlation Coefficient

Whitecap Resources  Baytex Energy

Modest diversification

The 3 months correlation between Whitecap and Baytex is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Whitecap Resources and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp and Whitecap Resources 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 Whitecap Resources are associated (or correlated) with Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of Whitecap Resources i.e., Whitecap Resources and Baytex Energy go up and down completely randomly.

Pair Corralation between Whitecap Resources and Baytex Energy

Assuming the 90 days trading horizon Whitecap Resources is expected to generate 0.64 times more return on investment than Baytex Energy. However, Whitecap Resources is 1.56 times less risky than Baytex Energy. It trades about 0.03 of its potential returns per unit of risk. Baytex Energy Corp is currently generating about -0.01 per unit of risk. If you would invest  850.00  in Whitecap Resources on September 1, 2024 and sell it today you would earn a total of  173.00  from holding Whitecap Resources or generate 20.35% return on investment over 90 days.

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

Whitecap Resources  vs.  Baytex Energy Corp

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.

Baytex Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baytex Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Whitecap Resources and Baytex Energy

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

The idea behind Whitecap Resources and Baytex Energy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.