Correlation Between PetroShale and Rockhopper Exploration
Can any of the company-specific risk be diversified away by investing in both PetroShale and Rockhopper 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 Rockhopper Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroShale and Rockhopper Exploration plc, you can compare the effects of market volatilities on PetroShale and Rockhopper 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 Rockhopper Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroShale and Rockhopper Exploration.
Diversification Opportunities for PetroShale and Rockhopper Exploration
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PetroShale and Rockhopper is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Rockhopper Exploration plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockhopper 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 Rockhopper Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockhopper Exploration has no effect on the direction of PetroShale i.e., PetroShale and Rockhopper Exploration go up and down completely randomly.
Pair Corralation between PetroShale and Rockhopper Exploration
Assuming the 90 days horizon PetroShale is expected to under-perform the Rockhopper Exploration. But the otc stock apears to be less risky and, when comparing its historical volatility, PetroShale is 1.66 times less risky than Rockhopper Exploration. The otc stock trades about 0.0 of its potential returns per unit of risk. The Rockhopper Exploration plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Rockhopper Exploration plc on September 2, 2024 and sell it today you would earn a total of 4.00 from holding Rockhopper Exploration plc or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroShale vs. Rockhopper Exploration plc
Performance |
| Timeline |
| PetroShale |
| Rockhopper Exploration |
PetroShale and Rockhopper Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroShale and Rockhopper Exploration
The main advantage of trading using opposite PetroShale and Rockhopper Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroShale position performs unexpectedly, Rockhopper 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 Rockhopper Exploration will offset losses from the drop in Rockhopper Exploration's long position.| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale vs. Tullow Oil plc |
| Rockhopper Exploration vs. PetroShale | Rockhopper Exploration vs. Pieridae Energy Limited | Rockhopper Exploration vs. EnQuest PLC | Rockhopper Exploration vs. Sino American Oil |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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