Correlation Between Empire Petroleum and Woodside Energy

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

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

Diversification Opportunities for Empire Petroleum and Woodside Energy

-0.47

Correlation Coefficient

Empire Petroleum  Woodside Energy

Very good diversification

The 3 months correlation between Empire and Woodside is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp and Woodside Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Energy Group and Empire 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 Empire Petroleum Corp are associated (or correlated) with Woodside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Energy Group has no effect on the direction of Empire Petroleum i.e., Empire Petroleum and Woodside Energy go up and down completely randomly.

Pair Corralation between Empire Petroleum and Woodside Energy

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to generate 1.83 times more return on investment than Woodside Energy. However, Empire Petroleum is 1.83 times more volatile than Woodside Energy Group. It trades about 0.18 of its potential returns per unit of risk. Woodside Energy Group is currently generating about -0.03 per unit of risk. If you would invest  492.00  in Empire Petroleum Corp on September 12, 2024 and sell it today you would earn a total of  213.00  from holding Empire Petroleum Corp or generate 43.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Empire Petroleum Corp  vs.  Woodside Energy Group

Empire Petroleum Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Petroleum Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Empire Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Woodside Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Woodside Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Empire Petroleum and Woodside Energy

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

The idea behind Empire Petroleum Corp and Woodside Energy Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.