Correlation Between Baytex Energy and SP Funds
Can any of the company-specific risk be diversified away by investing in both Baytex Energy and SP Funds 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 SP Funds 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 SP Funds Dow, you can compare the effects of market volatilities on Baytex Energy and SP Funds 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 SP Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baytex Energy and SP Funds.
Diversification Opportunities for Baytex Energy and SP Funds
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baytex and SPSK is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Baytex Energy Corp and SP Funds Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Funds Dow 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 SP Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Funds Dow has no effect on the direction of Baytex Energy i.e., Baytex Energy and SP Funds go up and down completely randomly.
Pair Corralation between Baytex Energy and SP Funds
Considering the 90-day investment horizon Baytex Energy Corp is expected to generate 10.93 times more return on investment than SP Funds. However, Baytex Energy is 10.93 times more volatile than SP Funds Dow. It trades about 0.08 of its potential returns per unit of risk. SP Funds Dow is currently generating about 0.14 per unit of risk. If you would invest 199.00 in Baytex Energy Corp on June 12, 2025 and sell it today you would earn a total of 24.00 from holding Baytex Energy Corp or generate 12.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baytex Energy Corp vs. SP Funds Dow
Performance |
| Timeline |
| Baytex Energy Corp |
| SP Funds Dow |
Baytex Energy and SP Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baytex Energy and SP Funds
The main advantage of trading using opposite Baytex Energy and SP Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baytex Energy position performs unexpectedly, SP Funds 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 SP Funds will offset losses from the drop in SP Funds' long position.| Baytex Energy vs. Vermilion Energy | Baytex Energy vs. Canadian Natural Resources | Baytex Energy vs. Precision Drilling | Baytex Energy vs. Permian Basin Royalty |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against SP Funds as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. SP Funds' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, SP Funds' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to SP Funds Dow.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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