Correlation Between Woodside Energy and Ring Energy

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Can any of the company-specific risk be diversified away by investing in both Woodside Energy and Ring 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 Woodside Energy and Ring Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woodside Energy Group and Ring Energy, you can compare the effects of market volatilities on Woodside Energy and Ring 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 Woodside Energy with a short position of Ring Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodside Energy and Ring Energy.

Diversification Opportunities for Woodside Energy and Ring Energy

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Woodside and Ring is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and Ring Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ring Energy and Woodside 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 Woodside Energy Group are associated (or correlated) with Ring Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ring Energy has no effect on the direction of Woodside Energy i.e., Woodside Energy and Ring Energy go up and down completely randomly.

Pair Corralation between Woodside Energy and Ring Energy

Assuming the 90 days trading horizon Woodside Energy is expected to generate 1.07 times less return on investment than Ring Energy. But when comparing it to its historical volatility, Woodside Energy Group is 2.12 times less risky than Ring Energy. It trades about 0.1 of its potential returns per unit of risk. Ring Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Ring Energy on September 5, 2024 and sell it today you would earn a total of  4.00  from holding Ring Energy or generate 2.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Woodside Energy Group  vs.  Ring Energy

 Performance 
       Timeline  
Woodside Energy Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Woodside Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Woodside Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Ring Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ring Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Woodside Energy and Ring Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Woodside Energy and Ring Energy

The main advantage of trading using opposite Woodside Energy and Ring Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodside Energy position performs unexpectedly, Ring 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 Ring Energy will offset losses from the drop in Ring Energy's long position.
The idea behind Woodside Energy Group and Ring Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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