Correlation Between SandRidge Mississippian and PetroShale
Can any of the company-specific risk be diversified away by investing in both SandRidge Mississippian 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 SandRidge Mississippian and PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SandRidge Mississippian Trust and PetroShale, you can compare the effects of market volatilities on SandRidge Mississippian 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 SandRidge Mississippian with a short position of PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Mississippian and PetroShale.
Diversification Opportunities for SandRidge Mississippian and PetroShale
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SandRidge and PetroShale is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Mississippian Trust and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and SandRidge Mississippian 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 SandRidge Mississippian Trust 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 SandRidge Mississippian i.e., SandRidge Mississippian and PetroShale go up and down completely randomly.
Pair Corralation between SandRidge Mississippian and PetroShale
Assuming the 90 days horizon SandRidge Mississippian Trust is expected to generate 2.36 times more return on investment than PetroShale. However, SandRidge Mississippian is 2.36 times more volatile than PetroShale. It trades about 0.01 of its potential returns per unit of risk. PetroShale is currently generating about -0.01 per unit of risk. If you would invest 8.70 in SandRidge Mississippian Trust on August 28, 2024 and sell it today you would lose (2.20) from holding SandRidge Mississippian Trust or give up 25.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.72% |
| Values | Daily Returns |
SandRidge Mississippian Trust vs. PetroShale
Performance |
| Timeline |
| SandRidge Mississippian |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PetroShale |
SandRidge Mississippian and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SandRidge Mississippian and PetroShale
The main advantage of trading using opposite SandRidge Mississippian and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Mississippian 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.| SandRidge Mississippian vs. PetroShale | SandRidge Mississippian vs. Inpex Corp ADR | SandRidge Mississippian vs. Canacol Energy | SandRidge Mississippian vs. Battalion Oil Corp |
| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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