Correlation Between Whitecap Resources and NuVista Energy

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

Diversification Opportunities for Whitecap Resources and NuVista Energy

-0.02

Correlation Coefficient

Whitecap Resources  NuVista Energy

Good diversification

The 3 months correlation between Whitecap and NuVista is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Whitecap Resources and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista Energy 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 NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of Whitecap Resources i.e., Whitecap Resources and NuVista Energy go up and down completely randomly.

Pair Corralation between Whitecap Resources and NuVista Energy

Assuming the 90 days trading horizon Whitecap Resources is expected to generate 2.58 times less return on investment than NuVista Energy. But when comparing it to its historical volatility, Whitecap Resources is 1.36 times less risky than NuVista Energy. It trades about 0.05 of its potential returns per unit of risk. NuVista Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,220  in NuVista Energy on September 1, 2024 and sell it today you would earn a total of  137.00  from holding NuVista Energy or generate 11.23% return on investment over 90 days.

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

Whitecap Resources  vs.  NuVista Energy

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.

NuVista Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NuVista Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, NuVista Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Whitecap Resources and NuVista Energy

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

The idea behind Whitecap Resources and NuVista 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.