Correlation Between PetroShale and Headwater Exploration
Can any of the company-specific risk be diversified away by investing in both PetroShale and Headwater Exploration 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 PetroShale and Headwater Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroShale and Headwater Exploration, you can compare the effects of market volatilities on PetroShale and Headwater Exploration 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 PetroShale with a short position of Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroShale and Headwater Exploration.
Diversification Opportunities for PetroShale and Headwater Exploration
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PetroShale and Headwater is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration and PetroShale 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 PetroShale are associated (or correlated) with Headwater Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Exploration has no effect on the direction of PetroShale i.e., PetroShale and Headwater Exploration go up and down completely randomly.
Pair Corralation between PetroShale and Headwater Exploration
Assuming the 90 days horizon PetroShale is expected to generate 0.65 times more return on investment than Headwater Exploration. However, PetroShale is 1.54 times less risky than Headwater Exploration. It trades about 0.13 of its potential returns per unit of risk. Headwater Exploration is currently generating about -0.01 per unit of risk. If you would invest 29.00 in PetroShale on November 3, 2024 and sell it today you would earn a total of 1.00 from holding PetroShale or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroShale vs. Headwater Exploration
Performance |
| Timeline |
| PetroShale |
| Headwater Exploration |
PetroShale and Headwater Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroShale and Headwater Exploration
The main advantage of trading using opposite PetroShale and Headwater Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroShale position performs unexpectedly, Headwater Exploration 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 Headwater Exploration will offset losses from the drop in Headwater Exploration's long position.| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale vs. Tullow Oil plc |
| Headwater Exploration vs. ROK Resources | Headwater Exploration vs. Pieridae Energy Limited | Headwater Exploration vs. Kelt Exploration | Headwater Exploration vs. Athabasca Oil Corp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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