Correlation Between Laredo Oil and PetroShale
Can any of the company-specific risk be diversified away by investing in both Laredo Oil 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 Laredo Oil and PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laredo Oil and PetroShale, you can compare the effects of market volatilities on Laredo Oil 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 Laredo Oil with a short position of PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laredo Oil and PetroShale.
Diversification Opportunities for Laredo Oil and PetroShale
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Laredo and PetroShale is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Laredo Oil and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and Laredo 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 Laredo Oil 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 Laredo Oil i.e., Laredo Oil and PetroShale go up and down completely randomly.
Pair Corralation between Laredo Oil and PetroShale
Given the investment horizon of 90 days Laredo Oil is expected to generate 3.41 times more return on investment than PetroShale. However, Laredo Oil is 3.41 times more volatile than PetroShale. It trades about 0.07 of its potential returns per unit of risk. PetroShale is currently generating about -0.01 per unit of risk. If you would invest 12.00 in Laredo Oil on August 30, 2024 and sell it today you would earn a total of 28.00 from holding Laredo Oil or generate 233.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laredo Oil vs. PetroShale
Performance |
| Timeline |
| Laredo Oil |
| PetroShale |
Laredo Oil and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laredo Oil and PetroShale
The main advantage of trading using opposite Laredo Oil and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laredo Oil 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.| Laredo Oil vs. Yamaha Motor Co | Laredo Oil vs. Nitto Denko Corp | Laredo Oil vs. Farmers Merchants Bancorp | Laredo Oil vs. Furukawa Electric Co |
| PetroShale vs. Yamaha Motor Co | PetroShale vs. Nitto Denko Corp | PetroShale vs. Farmers Merchants Bancorp | PetroShale vs. Furukawa Electric Co |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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