Correlation Between PetroShale and InPlay Oil
Can any of the company-specific risk be diversified away by investing in both PetroShale and InPlay 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 InPlay Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroShale and InPlay Oil Corp, you can compare the effects of market volatilities on PetroShale and InPlay 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 InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroShale and InPlay Oil.
Diversification Opportunities for PetroShale and InPlay Oil
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PetroShale and InPlay is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp 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 InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of PetroShale i.e., PetroShale and InPlay Oil go up and down completely randomly.
Pair Corralation between PetroShale and InPlay Oil
Assuming the 90 days horizon PetroShale is expected to generate 1.66 times more return on investment than InPlay Oil. However, PetroShale is 1.66 times more volatile than InPlay Oil Corp. It trades about 0.02 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.33 per unit of risk. If you would invest 29.00 in PetroShale on September 18, 2024 and sell it today you would earn a total of 0.00 from holding PetroShale or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroShale vs. InPlay Oil Corp
Performance |
| Timeline |
| PetroShale |
| InPlay Oil Corp |
PetroShale and InPlay Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroShale and InPlay Oil
The main advantage of trading using opposite PetroShale and InPlay Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroShale position performs unexpectedly, InPlay 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 InPlay Oil will offset losses from the drop in InPlay Oil's long position.| PetroShale vs. POSCO Holdings | PetroShale vs. Schweizerische Nationalbank | PetroShale vs. Berkshire Hathaway | PetroShale vs. Berkshire Hathaway |
| InPlay Oil vs. POSCO Holdings | InPlay Oil vs. Schweizerische Nationalbank | InPlay Oil vs. Berkshire Hathaway | InPlay Oil vs. Berkshire Hathaway |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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