Correlation Between Rockhopper Exploration and PetroShale
Can any of the company-specific risk be diversified away by investing in both Rockhopper Exploration and PetroShale 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 Rockhopper Exploration and PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rockhopper Exploration plc and PetroShale, you can compare the effects of market volatilities on Rockhopper Exploration and PetroShale 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 Rockhopper Exploration with a short position of PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockhopper Exploration and PetroShale.
Diversification Opportunities for Rockhopper Exploration and PetroShale
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rockhopper and PetroShale is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Rockhopper Exploration plc and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and Rockhopper Exploration 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 Rockhopper Exploration plc are associated (or correlated) with PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Rockhopper Exploration i.e., Rockhopper Exploration and PetroShale go up and down completely randomly.
Pair Corralation between Rockhopper Exploration and PetroShale
Assuming the 90 days horizon Rockhopper Exploration plc is expected to generate 5.21 times more return on investment than PetroShale. However, Rockhopper Exploration is 5.21 times more volatile than PetroShale. It trades about 0.17 of its potential returns per unit of risk. PetroShale is currently generating about -0.21 per unit of risk. If you would invest 16.00 in Rockhopper Exploration plc on August 30, 2024 and sell it today you would earn a total of 4.00 from holding Rockhopper Exploration plc or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rockhopper Exploration plc vs. PetroShale
Performance |
| Timeline |
| Rockhopper Exploration |
| PetroShale |
Rockhopper Exploration and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rockhopper Exploration and PetroShale
The main advantage of trading using opposite Rockhopper Exploration and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockhopper Exploration position performs unexpectedly, PetroShale 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 PetroShale will offset losses from the drop in PetroShale's long position.| Rockhopper Exploration vs. PetroShale | Rockhopper Exploration vs. Pieridae Energy Limited | Rockhopper Exploration vs. EnQuest PLC | Rockhopper Exploration vs. Sino American Oil |
| PetroShale vs. Yamaha Motor Co | PetroShale vs. Nitto Denko Corp | PetroShale vs. Farmers Merchants Bancorp | PetroShale vs. Furukawa Electric Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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