Correlation Between TAG Oil and Southern Energy
Can any of the company-specific risk be diversified away by investing in both TAG Oil and Southern Energy 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 TAG Oil and Southern Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TAG Oil and Southern Energy Corp, you can compare the effects of market volatilities on TAG Oil and Southern Energy 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 TAG Oil with a short position of Southern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAG Oil and Southern Energy.
Diversification Opportunities for TAG Oil and Southern Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TAG and Southern is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding TAG Oil and Southern Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Energy Corp and TAG Oil 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 TAG Oil are associated (or correlated) with Southern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Energy Corp has no effect on the direction of TAG Oil i.e., TAG Oil and Southern Energy go up and down completely randomly.
Pair Corralation between TAG Oil and Southern Energy
Assuming the 90 days horizon TAG Oil is expected to generate 0.64 times more return on investment than Southern Energy. However, TAG Oil is 1.56 times less risky than Southern Energy. It trades about 0.21 of its potential returns per unit of risk. Southern Energy Corp is currently generating about -0.05 per unit of risk. If you would invest 14.00 in TAG Oil on September 3, 2024 and sell it today you would earn a total of 3.00 from holding TAG Oil or generate 21.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TAG Oil vs. Southern Energy Corp
Performance |
| Timeline |
| TAG Oil |
| Southern Energy Corp |
TAG Oil and Southern Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAG Oil and Southern Energy
The main advantage of trading using opposite TAG Oil and Southern Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAG Oil position performs unexpectedly, Southern Energy 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 Southern Energy will offset losses from the drop in Southern Energy's long position.| TAG Oil vs. Southern Energy Corp | TAG Oil vs. ShaMaran Petroleum Corp | TAG Oil vs. Tenaz Energy Corp | TAG Oil vs. Hemisphere Energy |
| Southern Energy vs. Prospera Energy | Southern Energy vs. Pine Cliff Energy | Southern Energy vs. Lucero Energy Corp | Southern Energy vs. Pieridae 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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