Correlation Between Tullow Oil and Freehold Royalties
Can any of the company-specific risk be diversified away by investing in both Tullow Oil and Freehold Royalties 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 Tullow Oil and Freehold Royalties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tullow Oil PLC and Freehold Royalties, you can compare the effects of market volatilities on Tullow Oil and Freehold Royalties 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 Tullow Oil with a short position of Freehold Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tullow Oil and Freehold Royalties.
Diversification Opportunities for Tullow Oil and Freehold Royalties
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tullow and Freehold is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tullow Oil PLC and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties and Tullow 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 Tullow Oil PLC are associated (or correlated) with Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Tullow Oil i.e., Tullow Oil and Freehold Royalties go up and down completely randomly.
Pair Corralation between Tullow Oil and Freehold Royalties
Assuming the 90 days horizon Tullow Oil PLC is expected to under-perform the Freehold Royalties. In addition to that, Tullow Oil is 4.98 times more volatile than Freehold Royalties. It trades about -0.05 of its total potential returns per unit of risk. Freehold Royalties is currently generating about 0.01 per unit of volatility. If you would invest 984.00 in Freehold Royalties on September 1, 2024 and sell it today you would earn a total of 11.00 from holding Freehold Royalties or generate 1.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Tullow Oil PLC vs. Freehold Royalties
Performance |
| Timeline |
| Tullow Oil PLC |
| Freehold Royalties |
Tullow Oil and Freehold Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tullow Oil and Freehold Royalties
The main advantage of trading using opposite Tullow Oil and Freehold Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tullow Oil position performs unexpectedly, Freehold Royalties 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 Freehold Royalties will offset losses from the drop in Freehold Royalties' long position.| Tullow Oil vs. Permian Resources | Tullow Oil vs. Devon Energy | Tullow Oil vs. EOG Resources | Tullow Oil vs. Coterra Energy |
| Freehold Royalties vs. PrairieSky Royalty | Freehold Royalties vs. Tamarack Valley Energy | Freehold Royalties vs. MEG Energy Corp | Freehold Royalties vs. Tourmaline Oil Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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