Correlation Between Sound Energy and PetroShale
Can any of the company-specific risk be diversified away by investing in both Sound Energy 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 Sound Energy and PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Energy plc and PetroShale, you can compare the effects of market volatilities on Sound Energy 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 Sound Energy with a short position of PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Energy and PetroShale.
Diversification Opportunities for Sound Energy and PetroShale
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sound and PetroShale is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sound Energy plc and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and Sound Energy 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 Sound Energy 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 Sound Energy i.e., Sound Energy and PetroShale go up and down completely randomly.
Pair Corralation between Sound Energy and PetroShale
Assuming the 90 days horizon Sound Energy plc is expected to generate 10.64 times more return on investment than PetroShale. However, Sound Energy is 10.64 times more volatile than PetroShale. It trades about 0.05 of its potential returns per unit of risk. PetroShale is currently generating about -0.15 per unit of risk. If you would invest 1.48 in Sound Energy plc on September 3, 2024 and sell it today you would lose (1.07) from holding Sound Energy plc or give up 72.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Sound Energy plc vs. PetroShale
Performance |
| Timeline |
| Sound Energy plc |
| PetroShale |
Sound Energy and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Energy and PetroShale
The main advantage of trading using opposite Sound Energy and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Energy 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.| Sound Energy vs. CNX Resources Corp | Sound Energy vs. MV Oil Trust | Sound Energy vs. San Juan Basin | Sound Energy vs. VOC Energy Trust |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |