Correlation Between Frontera Energy and FEC Resources

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

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

Diversification Opportunities for Frontera Energy and FEC Resources

0.25

Correlation Coefficient

Frontera Energy  FEC Resources

Modest diversification

The 3 months correlation between Frontera and FEC is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Frontera Energy Corp and FEC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEC Resources and Frontera 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 Frontera Energy Corp are associated (or correlated) with FEC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEC Resources has no effect on the direction of Frontera Energy i.e., Frontera Energy and FEC Resources go up and down completely randomly.

Pair Corralation between Frontera Energy and FEC Resources

Assuming the 90 days horizon Frontera Energy is expected to generate 19.83 times less return on investment than FEC Resources. But when comparing it to its historical volatility, Frontera Energy Corp is 19.11 times less risky than FEC Resources. It trades about 0.14 of its potential returns per unit of risk. FEC Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.16  in FEC Resources on May 14, 2025 and sell it today you would lose (0.07) from holding FEC Resources or give up 43.75% of portfolio value over 90 days.

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

Frontera Energy Corp  vs.  FEC Resources

Frontera Energy Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontera Energy Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Frontera Energy reported solid returns over the last few months and may actually be approaching a breakup point.

FEC Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FEC Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontera Energy and FEC Resources

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

The idea behind Frontera Energy Corp and FEC 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.