Correlation Between Horizon Oil and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Horizon Oil and Diamondback Energy 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 Horizon Oil and Diamondback Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Horizon Oil Limited and Diamondback Energy, you can compare the effects of market volatilities on Horizon Oil and Diamondback Energy 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 Horizon Oil with a short position of Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Oil and Diamondback Energy.
Diversification Opportunities for Horizon Oil and Diamondback Energy
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Horizon and Diamondback is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Oil Limited and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy and Horizon Oil 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 Horizon Oil Limited are associated (or correlated) with Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of Horizon Oil i.e., Horizon Oil and Diamondback Energy go up and down completely randomly.
Pair Corralation between Horizon Oil and Diamondback Energy
Assuming the 90 days horizon Horizon Oil Limited is expected to generate 3.32 times more return on investment than Diamondback Energy. However, Horizon Oil is 3.32 times more volatile than Diamondback Energy. It trades about 0.06 of its potential returns per unit of risk. Diamondback Energy is currently generating about 0.05 per unit of risk. If you would invest 12.00 in Horizon Oil Limited on August 28, 2024 and sell it today you would earn a total of 1.00 from holding Horizon Oil Limited or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Horizon Oil Limited vs. Diamondback Energy
Performance |
| Timeline |
| Horizon Oil Limited |
| Diamondback Energy |
Horizon Oil and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Horizon Oil and Diamondback Energy
The main advantage of trading using opposite Horizon Oil and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Oil position performs unexpectedly, Diamondback Energy 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 Diamondback Energy will offset losses from the drop in Diamondback Energy's long position.| Horizon Oil vs. Permian Resources | Horizon Oil vs. Devon Energy | Horizon Oil vs. EOG Resources | Horizon Oil vs. Coterra Energy |
| Diamondback Energy vs. ConocoPhillips | Diamondback Energy vs. Occidental Petroleum | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. Coterra Energy |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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