Correlation Between FEC Resources and Daybreak Oil

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Can any of the company-specific risk be diversified away by investing in both FEC Resources and Daybreak 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 FEC Resources and Daybreak Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FEC Resources and Daybreak Oil and, you can compare the effects of market volatilities on FEC Resources and Daybreak 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 FEC Resources with a short position of Daybreak Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of FEC Resources and Daybreak Oil.

Diversification Opportunities for FEC Resources and Daybreak Oil

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between FEC and Daybreak is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FEC Resources and Daybreak Oil and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daybreak Oil and FEC Resources 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 FEC Resources are associated (or correlated) with Daybreak Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daybreak Oil has no effect on the direction of FEC Resources i.e., FEC Resources and Daybreak Oil go up and down completely randomly.

Pair Corralation between FEC Resources and Daybreak Oil

If you would invest  0.16  in FEC Resources on May 3, 2025 and sell it today you would lose (0.05) from holding FEC Resources or give up 31.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

FEC Resources  vs.  Daybreak Oil and

 Performance 
       Timeline  
FEC Resources 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
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.
Daybreak Oil 

Risk-Adjusted Performance

Very Weak

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

FEC Resources and Daybreak Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FEC Resources and Daybreak Oil

The main advantage of trading using opposite FEC Resources and Daybreak Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEC Resources position performs unexpectedly, Daybreak 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 Daybreak Oil will offset losses from the drop in Daybreak Oil's long position.
The idea behind FEC Resources and Daybreak Oil and 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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