Correlation Between Baytex Energy and Tourmaline Oil

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

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

Diversification Opportunities for Baytex Energy and Tourmaline Oil

0.61

Correlation Coefficient

Baytex Energy  Tourmaline Oil

Poor diversification

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

Pair Corralation between Baytex Energy and Tourmaline Oil

Assuming the 90 days trading horizon Baytex Energy Corp is expected to generate 2.85 times more return on investment than Tourmaline Oil. However, Baytex Energy is 2.85 times more volatile than Tourmaline Oil Corp. It trades about 0.09 of its potential returns per unit of risk. Tourmaline Oil Corp is currently generating about -0.02 per unit of risk. If you would invest  226.00  in Baytex Energy Corp on April 24, 2025 and sell it today you would earn a total of  45.00  from holding Baytex Energy Corp or generate 19.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Baytex Energy Corp  vs.  Tourmaline Oil Corp

Baytex Energy Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baytex Energy Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Baytex Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Tourmaline Oil Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Baytex Energy and Tourmaline Oil

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

The idea behind Baytex Energy Corp and Tourmaline Oil 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.