Correlation Between International Petroleum and Tethys Oil
Can any of the company-specific risk be diversified away by investing in both International Petroleum and Tethys 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 International Petroleum and Tethys Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Petroleum and Tethys Oil AB, you can compare the effects of market volatilities on International Petroleum and Tethys 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 International Petroleum with a short position of Tethys Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Petroleum and Tethys Oil.
Diversification Opportunities for International Petroleum and Tethys Oil
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Tethys is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum and Tethys Oil AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tethys Oil AB and International Petroleum 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 International Petroleum are associated (or correlated) with Tethys Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tethys Oil AB has no effect on the direction of International Petroleum i.e., International Petroleum and Tethys Oil go up and down completely randomly.
Pair Corralation between International Petroleum and Tethys Oil
Assuming the 90 days trading horizon International Petroleum is expected to generate 3.31 times more return on investment than Tethys Oil. However, International Petroleum is 3.31 times more volatile than Tethys Oil AB. It trades about 0.05 of its potential returns per unit of risk. Tethys Oil AB is currently generating about -0.03 per unit of risk. If you would invest 12,090 in International Petroleum on August 30, 2024 and sell it today you would earn a total of 210.00 from holding International Petroleum or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Petroleum vs. Tethys Oil AB
Performance |
| Timeline |
| International Petroleum |
| Tethys Oil AB |
International Petroleum and Tethys Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Petroleum and Tethys Oil
The main advantage of trading using opposite International Petroleum and Tethys Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Petroleum position performs unexpectedly, Tethys 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 Tethys Oil will offset losses from the drop in Tethys Oil's long position.| International Petroleum vs. Africa Oil Corp | International Petroleum vs. International Petroleum Corp | International Petroleum vs. Lundin Mining |
| Tethys Oil vs. Africa Oil Corp | Tethys Oil vs. International Petroleum | Tethys Oil vs. Maha Energy AB | Tethys Oil vs. Nobia AB |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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