Correlation Between Energy Revenue and PetroShale
Can any of the company-specific risk be diversified away by investing in both Energy Revenue and PetroShale 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 Energy Revenue and PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Revenue Amer and PetroShale, you can compare the effects of market volatilities on Energy Revenue and PetroShale 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 Energy Revenue with a short position of PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Revenue and PetroShale.
Diversification Opportunities for Energy Revenue and PetroShale
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energy and PetroShale is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Energy Revenue Amer and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and Energy Revenue 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 Energy Revenue Amer are associated (or correlated) with PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Energy Revenue i.e., Energy Revenue and PetroShale go up and down completely randomly.
Pair Corralation between Energy Revenue and PetroShale
Given the investment horizon of 90 days Energy Revenue Amer is expected to under-perform the PetroShale. In addition to that, Energy Revenue is 15.21 times more volatile than PetroShale. It trades about -0.07 of its total potential returns per unit of risk. PetroShale is currently generating about -0.12 per unit of volatility. If you would invest 29.00 in PetroShale on September 3, 2024 and sell it today you would lose (1.00) from holding PetroShale or give up 3.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Revenue Amer vs. PetroShale
Performance |
| Timeline |
| Energy Revenue Amer |
| PetroShale |
Energy Revenue and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Revenue and PetroShale
The main advantage of trading using opposite Energy Revenue and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Revenue position performs unexpectedly, PetroShale 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 PetroShale will offset losses from the drop in PetroShale's long position.| Energy Revenue vs. Gulfport Energy Operating | Energy Revenue vs. Magnolia Oil Gas | Energy Revenue vs. Vital Energy | Energy Revenue vs. Texas Pacific Land |
| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale vs. Tullow Oil plc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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