Correlation Between Birchcliff Energy and First Trust

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

By analyzing existing cross correlation between Birchcliff Energy and First Trust Japan, you can compare the effects of market volatilities on Birchcliff Energy and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Birchcliff Energy and First Trust.

Diversification Opportunities for Birchcliff Energy and First Trust

0.36

Correlation Coefficient

Birchcliff Energy  First Trust

Weak diversification

The 3 months correlation between Birchcliff and First is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Birchcliff Energy and First Trust Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Japan 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Japan has no effect on the direction of Birchcliff Energy i.e., Birchcliff Energy and First Trust go up and down completely randomly.

Pair Corralation between Birchcliff Energy and First Trust

Assuming the 90 days trading horizon Birchcliff Energy is expected to generate 2.2 times more return on investment than First Trust. However, Birchcliff Energy is 2.2 times more volatile than First Trust Japan. It trades about 0.03 of its potential returns per unit of risk. First Trust Japan is currently generating about 0.02 per unit of risk. If you would invest  533.00  in Birchcliff Energy on January 17, 2024 and sell it today you would earn a total of  5.00  from holding Birchcliff Energy or generate 0.94% return on investment over 90 days.

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

Birchcliff Energy  vs.  First Trust Japan

Birchcliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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 latest stock price disarray, may contribute to short-term losses for the investors.

First Trust Japan

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Japan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Birchcliff Energy and First Trust

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

The idea behind Birchcliff Energy and First Trust Japan 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.