Correlation Between ARC Resources and Petro Victory

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

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

Diversification Opportunities for ARC Resources and Petro Victory

-0.77

Correlation Coefficient

ARC Resources  Petro Victory

Pay attention - limited upside

The 3 months correlation between ARC and Petro is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding ARC Resources and Petro Victory Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Victory Energy and ARC 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 ARC Resources are associated (or correlated) with Petro Victory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Victory Energy has no effect on the direction of ARC Resources i.e., ARC Resources and Petro Victory go up and down completely randomly.

Pair Corralation between ARC Resources and Petro Victory

Assuming the 90 days trading horizon ARC Resources is expected to generate 0.62 times more return on investment than Petro Victory. However, ARC Resources is 1.62 times less risky than Petro Victory. It trades about 0.23 of its potential returns per unit of risk. Petro Victory Energy Corp is currently generating about 0.02 per unit of risk. If you would invest  2,361  in ARC Resources on January 25, 2024 and sell it today you would earn a total of  168.00  from holding ARC Resources or generate 7.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

ARC Resources  vs.  Petro Victory Energy Corp

ARC Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARC Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ARC Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Petro Victory Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petro Victory Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Petro Victory is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ARC Resources and Petro Victory

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

The idea behind ARC Resources and Petro Victory 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.