Correlation Between Obsidian Energy and Enerplus

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

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

Diversification Opportunities for Obsidian Energy and Enerplus

0.93

Correlation Coefficient

Obsidian Energy  Enerplus

Almost no diversification

The 3 months correlation between Obsidian and Enerplus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Obsidian Energy and Enerplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerplus and Obsidian 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 Obsidian Energy are associated (or correlated) with Enerplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerplus has no effect on the direction of Obsidian Energy i.e., Obsidian Energy and Enerplus go up and down completely randomly.

Pair Corralation between Obsidian Energy and Enerplus

Considering the 90-day investment horizon Obsidian Energy is expected to under-perform the Enerplus. In addition to that, Obsidian Energy is 2.0 times more volatile than Enerplus. It trades about -0.08 of its total potential returns per unit of risk. Enerplus is currently generating about -0.1 per unit of volatility. If you would invest  2,003  in Enerplus on February 4, 2024 and sell it today you would lose (55.00) from holding Enerplus or give up 2.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Obsidian Energy  vs.  Enerplus

Obsidian Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Obsidian Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Obsidian Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Enerplus

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enerplus are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Enerplus reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Obsidian Energy and Enerplus

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

The idea behind Obsidian Energy and Enerplus 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.