Correlation Between Century Petroleum and Barrel Energy

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

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

Diversification Opportunities for Century Petroleum and Barrel Energy

0.0

Correlation Coefficient

Century Petroleum  Barrel Energy

Pay attention - limited upside

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

Pair Corralation between Century Petroleum and Barrel Energy

Given the investment horizon of 90 days Century Petroleum Corp is expected to generate 3.79 times more return on investment than Barrel Energy. However, Century Petroleum is 3.79 times more volatile than Barrel Energy. It trades about 0.04 of its potential returns per unit of risk. Barrel Energy is currently generating about 0.0 per unit of risk. If you would invest  0.01  in Century Petroleum Corp on September 24, 2024 and sell it today you would lose (0.01) from holding Century Petroleum Corp or give up 90.0% of portfolio value over 90 days.

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

Century Petroleum Corp  vs.  Barrel Energy

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.

Barrel Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrel Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Barrel Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Century Petroleum and Barrel Energy

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

The idea behind Century Petroleum Corp and Barrel 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.