Correlation Between Birchcliff Energy and Arkema SA

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Can any of the company-specific risk be diversified away by investing in both Birchcliff Energy and Arkema SA 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 Birchcliff Energy and Arkema SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Birchcliff Energy and Arkema SA, you can compare the effects of market volatilities on Birchcliff Energy and Arkema SA 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 Birchcliff Energy with a short position of Arkema SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Birchcliff Energy and Arkema SA.

Diversification Opportunities for Birchcliff Energy and Arkema SA

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Birchcliff and Arkema is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Birchcliff Energy and Arkema SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA and Birchcliff Energy 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 Birchcliff Energy are associated (or correlated) with Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA has no effect on the direction of Birchcliff Energy i.e., Birchcliff Energy and Arkema SA go up and down completely randomly.

Pair Corralation between Birchcliff Energy and Arkema SA

If you would invest  523.00  in Birchcliff Energy on December 29, 2023 and sell it today you would earn a total of  8.00  from holding Birchcliff Energy or generate 1.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Birchcliff Energy  vs.  Arkema SA

 Performance 
       Timeline  
Birchcliff Energy 

Risk-Adjusted Performance

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Over the last 90 days Birchcliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Birchcliff Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Arkema SA 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Arkema SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arkema SA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Birchcliff Energy and Arkema SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Birchcliff Energy and Arkema SA

The main advantage of trading using opposite Birchcliff Energy and Arkema SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birchcliff Energy position performs unexpectedly, Arkema SA 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 Arkema SA will offset losses from the drop in Arkema SA's long position.
The idea behind Birchcliff Energy and Arkema SA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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