Correlation Between Tourmaline Oil and Baytex Energy

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

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

Diversification Opportunities for Tourmaline Oil and Baytex Energy

0.61

Correlation Coefficient

Tourmaline Oil  Baytex Energy

Poor diversification

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

Pair Corralation between Tourmaline Oil and Baytex Energy

Assuming the 90 days trading horizon Tourmaline Oil Corp is expected to under-perform the Baytex Energy. But the stock apears to be less risky and, when comparing its historical volatility, Tourmaline Oil Corp is 2.91 times less risky than Baytex Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Baytex Energy Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Baytex Energy Corp on April 22, 2025 and sell it today you would earn a total of  33.00  from holding Baytex Energy Corp or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Tourmaline Oil Corp  vs.  Baytex Energy Corp

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

Baytex Energy Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baytex Energy Corp are ranked lower than 5 (%) 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.

Pair Trading with Tourmaline Oil and Baytex Energy

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

The idea behind Tourmaline Oil Corp and Baytex Energy 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.