Correlation Between Woodside Petroleum and North European
Can any of the company-specific risk be diversified away by investing in both Woodside Petroleum and North European 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 Petroleum and North European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woodside Petroleum and North European Oil, you can compare the effects of market volatilities on Woodside Petroleum and North European 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 Petroleum with a short position of North European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodside Petroleum and North European.
Diversification Opportunities for Woodside Petroleum and North European
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Woodside and North is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Petroleum and North European Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North European Oil and Woodside Petroleum 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 Petroleum are associated (or correlated) with North European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North European Oil has no effect on the direction of Woodside Petroleum i.e., Woodside Petroleum and North European go up and down completely randomly.
Pair Corralation between Woodside Petroleum and North European
Assuming the 90 days horizon Woodside Petroleum is expected to under-perform the North European. In addition to that, Woodside Petroleum is 2.74 times more volatile than North European Oil. It trades about -0.03 of its total potential returns per unit of risk. North European Oil is currently generating about 0.02 per unit of volatility. If you would invest 451.00 in North European Oil on November 3, 2024 and sell it today you would earn a total of 1.00 from holding North European Oil or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woodside Petroleum vs. North European Oil
Performance |
| Timeline |
| Woodside Petroleum |
| North European Oil |
Woodside Petroleum and North European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woodside Petroleum and North European
The main advantage of trading using opposite Woodside Petroleum and North European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodside Petroleum position performs unexpectedly, North European 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 North European will offset losses from the drop in North European's long position.| Woodside Petroleum vs. Inpex Corp ADR | Woodside Petroleum vs. Falcon Oil Gas | Woodside Petroleum vs. Pantheon Resources Plc | Woodside Petroleum vs. Woodside Energy Group |
| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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