Correlation Between Petrofac and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Petrofac and Natural Gas 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 Petrofac and Natural Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrofac Ltd ADR and Natural Gas Services, you can compare the effects of market volatilities on Petrofac and Natural Gas 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 Petrofac with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrofac and Natural Gas.
Diversification Opportunities for Petrofac and Natural Gas
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Petrofac and Natural is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Petrofac Ltd ADR and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services and Petrofac 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 Petrofac Ltd ADR are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Petrofac i.e., Petrofac and Natural Gas go up and down completely randomly.
Pair Corralation between Petrofac and Natural Gas
Assuming the 90 days horizon Petrofac Ltd ADR is expected to under-perform the Natural Gas. In addition to that, Petrofac is 3.41 times more volatile than Natural Gas Services. It trades about -0.03 of its total potential returns per unit of risk. Natural Gas Services is currently generating about 0.11 per unit of volatility. If you would invest 2,040 in Natural Gas Services on November 2, 2024 and sell it today you would earn a total of 645.00 from holding Natural Gas Services or generate 31.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrofac Ltd ADR vs. Natural Gas Services
Performance |
| Timeline |
| Petrofac ADR |
| Natural Gas Services |
Petrofac and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrofac and Natural Gas
The main advantage of trading using opposite Petrofac and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrofac position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.The idea behind Petrofac Ltd ADR and Natural Gas Services 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.| Natural Gas vs. Enerflex | Natural Gas vs. Forum Energy Technologies | Natural Gas vs. Archrock | Natural Gas vs. Geospace Technologies |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |