Correlation Between Pine Cliff and Prairie Provident

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

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

Diversification Opportunities for Pine Cliff and Prairie Provident

-0.31

Correlation Coefficient

Pine Cliff  Prairie Provident

Very good diversification

The 3 months correlation between Pine and Prairie is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident and Pine Cliff 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 Pine Cliff Energy are associated (or correlated) with Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Pine Cliff i.e., Pine Cliff and Prairie Provident go up and down completely randomly.

Pair Corralation between Pine Cliff and Prairie Provident

Assuming the 90 days trading horizon Pine Cliff Energy is expected to generate 0.37 times more return on investment than Prairie Provident. However, Pine Cliff Energy is 2.67 times less risky than Prairie Provident. It trades about 0.16 of its potential returns per unit of risk. Prairie Provident Resources is currently generating about 0.05 per unit of risk. If you would invest  55.00  in Pine Cliff Energy on April 22, 2025 and sell it today you would earn a total of  20.00  from holding Pine Cliff Energy or generate 36.36% return on investment over 90 days.

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

Pine Cliff Energy  vs.  Prairie Provident Resources

Pine Cliff Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pine Cliff Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Pine Cliff displayed solid returns over the last few months and may actually be approaching a breakup point.

Prairie Provident

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Prairie Provident displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pine Cliff and Prairie Provident

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

The idea behind Pine Cliff Energy and Prairie Provident Resources 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.