Correlation Between Mogul Energy and Providence Resources
Can any of the company-specific risk be diversified away by investing in both Mogul Energy and Providence Resources 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 Mogul Energy and Providence Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mogul Energy International and Providence Resources, you can compare the effects of market volatilities on Mogul Energy and Providence Resources 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 Mogul Energy with a short position of Providence Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mogul Energy and Providence Resources.
Diversification Opportunities for Mogul Energy and Providence Resources
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mogul and Providence is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mogul Energy International and Providence Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Providence Resources and Mogul 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 Mogul Energy International are associated (or correlated) with Providence Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Providence Resources has no effect on the direction of Mogul Energy i.e., Mogul Energy and Providence Resources go up and down completely randomly.
Pair Corralation between Mogul Energy and Providence Resources
Given the investment horizon of 90 days Mogul Energy International is expected to under-perform the Providence Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mogul Energy International is 2.59 times less risky than Providence Resources. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Providence Resources is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 0.90 in Providence Resources on September 2, 2024 and sell it today you would lose (0.38) from holding Providence Resources or give up 42.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Mogul Energy International vs. Providence Resources
Performance |
| Timeline |
| Mogul Energy Interna |
| Providence Resources |
Mogul Energy and Providence Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mogul Energy and Providence Resources
The main advantage of trading using opposite Mogul Energy and Providence Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mogul Energy position performs unexpectedly, Providence Resources 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 Providence Resources will offset losses from the drop in Providence Resources' long position.The idea behind Mogul Energy International and Providence Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Providence Resources vs. American Leisure Holdings | Providence Resources vs. Supurva Healthcare Group | Providence Resources vs. China Health Management | Providence Resources vs. Embrace Change Acquisition |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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