Correlation Between Crescent Point and Enerplus

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

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

Diversification Opportunities for Crescent Point and Enerplus

0.83

Correlation Coefficient

Crescent Point  Enerplus

Very poor diversification

The 3 months correlation between Crescent and Enerplus is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Point Energy and Enerplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerplus and Crescent Point 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 Crescent Point 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 Crescent Point i.e., Crescent Point and Enerplus go up and down completely randomly.

Pair Corralation between Crescent Point and Enerplus

Assuming the 90 days trading horizon Crescent Point Energy is expected to generate 1.49 times more return on investment than Enerplus. However, Crescent Point is 1.49 times more volatile than Enerplus. It trades about 0.47 of its potential returns per unit of risk. Enerplus is currently generating about 0.44 per unit of risk. If you would invest  958.00  in Crescent Point Energy on January 29, 2024 and sell it today you would earn a total of  280.00  from holding Crescent Point Energy or generate 29.23% return on investment over 90 days.

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

Crescent Point Energy  vs.  Enerplus

Crescent Point Energy

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Point Energy are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Crescent Point displayed solid returns over the last few months and may actually be approaching a breakup point.

Enerplus

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enerplus are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Enerplus displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crescent Point and Enerplus

The main advantage of trading using opposite Crescent Point and Enerplus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Point 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 Crescent Point 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.