Correlation Between 88 Energy and Carnarvon Petroleum
Can any of the company-specific risk be diversified away by investing in both 88 Energy and Carnarvon Petroleum 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 88 Energy and Carnarvon Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 88 Energy Limited and Carnarvon Petroleum Limited, you can compare the effects of market volatilities on 88 Energy and Carnarvon Petroleum 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 88 Energy with a short position of Carnarvon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of 88 Energy and Carnarvon Petroleum.
Diversification Opportunities for 88 Energy and Carnarvon Petroleum
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between EEENF and Carnarvon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding 88 Energy Limited and Carnarvon Petroleum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnarvon Petroleum and 88 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 88 Energy Limited are associated (or correlated) with Carnarvon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnarvon Petroleum has no effect on the direction of 88 Energy i.e., 88 Energy and Carnarvon Petroleum go up and down completely randomly.
Pair Corralation between 88 Energy and Carnarvon Petroleum
Assuming the 90 days horizon 88 Energy Limited is expected to generate 1.44 times more return on investment than Carnarvon Petroleum. However, 88 Energy is 1.44 times more volatile than Carnarvon Petroleum Limited. It trades about -0.01 of its potential returns per unit of risk. Carnarvon Petroleum Limited is currently generating about -0.03 per unit of risk. If you would invest 0.18 in 88 Energy Limited on August 30, 2024 and sell it today you would lose (0.06) from holding 88 Energy Limited or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
88 Energy Limited vs. Carnarvon Petroleum Limited
Performance |
| Timeline |
| 88 Energy Limited |
| Carnarvon Petroleum |
88 Energy and Carnarvon Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 88 Energy and Carnarvon Petroleum
The main advantage of trading using opposite 88 Energy and Carnarvon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 88 Energy position performs unexpectedly, Carnarvon Petroleum 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 Carnarvon Petroleum will offset losses from the drop in Carnarvon Petroleum's long position.| 88 Energy vs. Invictus Energy Limited | 88 Energy vs. Sintana Energy | 88 Energy vs. Journey Energy | 88 Energy vs. Trillion Energy International |
| Carnarvon Petroleum vs. 88 Energy Limited | Carnarvon Petroleum vs. MMEX Resources Corp | Carnarvon Petroleum vs. Africa Oil Corp | Carnarvon Petroleum vs. Reconnaissance Energy Africa |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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