Correlation Between Calima Energy and Century Petroleum

Can any of the company-specific risk be diversified away by investing in both Calima Energy and Century Petroleum 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 Calima Energy and Century Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Calima Energy Limited and Century Petroleum Corp, you can compare the effects of market volatilities on Calima Energy and Century Petroleum 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 Calima Energy with a short position of Century Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calima Energy and Century Petroleum.

Diversification Opportunities for Calima Energy and Century Petroleum

0.0

Correlation Coefficient

Calima Energy  Century Petroleum

Pay attention - limited upside

The 3 months correlation between Calima and Century is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Calima Energy Limited and Century Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Petroleum Corp and Calima 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 Calima Energy Limited are associated (or correlated) with Century Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Petroleum Corp has no effect on the direction of Calima Energy i.e., Calima Energy and Century Petroleum go up and down completely randomly.

Pair Corralation between Calima Energy and Century Petroleum

Assuming the 90 days horizon Calima Energy Limited is expected to generate 1.0 times more return on investment than Century Petroleum. However, Calima Energy is 1.0 times more volatile than Century Petroleum Corp. It trades about 0.06 of its potential returns per unit of risk. Century Petroleum Corp is currently generating about 0.06 per unit of risk. If you would invest  5.50  in Calima Energy Limited on September 24, 2024 and sell it today you would lose (4.25) from holding Calima Energy Limited or give up 77.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Calima Energy Limited  vs.  Century Petroleum Corp

Calima Energy Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calima Energy Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Calima Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Century Petroleum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Century Petroleum is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Calima Energy and Century Petroleum

The main advantage of trading using opposite Calima Energy and Century Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calima Energy position performs unexpectedly, Century Petroleum 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 Century Petroleum will offset losses from the drop in Century Petroleum's long position.

The idea behind Calima Energy Limited and Century Petroleum Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.