Correlation Between PetroShale and Horizon Oil
Can any of the company-specific risk be diversified away by investing in both PetroShale and Horizon 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 PetroShale and Horizon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroShale and Horizon Oil Limited, you can compare the effects of market volatilities on PetroShale and Horizon 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 PetroShale with a short position of Horizon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroShale and Horizon Oil.
Diversification Opportunities for PetroShale and Horizon Oil
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between PetroShale and Horizon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Horizon Oil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Oil Limited 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 Horizon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Oil Limited has no effect on the direction of PetroShale i.e., PetroShale and Horizon Oil go up and down completely randomly.
Pair Corralation between PetroShale and Horizon Oil
Assuming the 90 days horizon PetroShale is expected to generate 8.05 times less return on investment than Horizon Oil. But when comparing it to its historical volatility, PetroShale is 4.76 times less risky than Horizon Oil. It trades about 0.13 of its potential returns per unit of risk. Horizon Oil Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Horizon Oil Limited on November 3, 2024 and sell it today you would earn a total of 3.00 from holding Horizon Oil Limited or generate 27.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
PetroShale vs. Horizon Oil Limited
Performance |
| Timeline |
| PetroShale |
| Horizon Oil Limited |
PetroShale and Horizon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroShale and Horizon Oil
The main advantage of trading using opposite PetroShale and Horizon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroShale position performs unexpectedly, Horizon 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 Horizon Oil will offset losses from the drop in Horizon Oil's long position.| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale vs. Tullow Oil plc |
| Horizon Oil vs. Dno ASA | Horizon Oil vs. PetroShale | Horizon Oil vs. Enwell Energy plc | Horizon Oil vs. Tullow Oil plc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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