Correlation Between ROK Resources and Horizon Oil
Can any of the company-specific risk be diversified away by investing in both ROK Resources 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 ROK Resources and Horizon 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 Horizon Oil Limited, you can compare the effects of market volatilities on ROK Resources 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 ROK Resources with a short position of Horizon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ROK Resources and Horizon Oil.
Diversification Opportunities for ROK Resources and Horizon Oil
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between ROK and Horizon is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding ROK Resources 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 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 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 ROK Resources i.e., ROK Resources and Horizon Oil go up and down completely randomly.
Pair Corralation between ROK Resources and Horizon Oil
Assuming the 90 days horizon ROK Resources is expected to under-perform the Horizon Oil. But the otc stock apears to be less risky and, when comparing its historical volatility, ROK Resources is 1.4 times less risky than Horizon Oil. The otc stock trades about -0.16 of its potential returns per unit of risk. The 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 Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
ROK Resources vs. Horizon Oil Limited
Performance |
| Timeline |
| ROK Resources |
| Horizon Oil Limited |
ROK Resources and Horizon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ROK Resources and Horizon Oil
The main advantage of trading using opposite ROK Resources and Horizon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROK Resources 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.| ROK Resources vs. Legacy Education | ROK Resources vs. Apple Inc | ROK Resources vs. Microsoft | ROK Resources vs. NVIDIA |
| 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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