Correlation Between ROK Resources and InPlay Oil
Can any of the company-specific risk be diversified away by investing in both ROK Resources 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 ROK Resources and InPlay Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ROK Resources and InPlay Oil Corp, you can compare the effects of market volatilities on ROK Resources 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 ROK Resources with a short position of InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ROK Resources and InPlay Oil.
Diversification Opportunities for ROK Resources and InPlay Oil
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ROK and InPlay is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ROK Resources 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 ROK Resources 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 ROK Resources 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 ROK Resources i.e., ROK Resources and InPlay Oil go up and down completely randomly.
Pair Corralation between ROK Resources and InPlay Oil
Assuming the 90 days horizon ROK Resources is expected to generate 1.87 times more return on investment than InPlay Oil. However, ROK Resources is 1.87 times more volatile than InPlay Oil Corp. It trades about -0.03 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.12 per unit of risk. If you would invest 19.00 in ROK Resources on August 31, 2024 and sell it today you would lose (2.00) from holding ROK Resources or give up 10.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ROK Resources vs. InPlay Oil Corp
Performance |
| Timeline |
| ROK Resources |
| InPlay Oil Corp |
ROK Resources and InPlay Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ROK Resources and InPlay Oil
The main advantage of trading using opposite ROK Resources and InPlay Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROK Resources 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.| ROK Resources vs. Silver Buckle Mines | ROK Resources vs. TVI Pacific | ROK Resources vs. Trigon Metals | ROK Resources vs. Mountain Boy Minerals |
| InPlay Oil vs. Gear Energy | InPlay Oil vs. Journey Energy | InPlay Oil vs. Yangarra Resources | InPlay Oil vs. Obsidian Energy |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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