Correlation Between Horizon Oil and Southern Cross

Can any of the company-specific risk be diversified away by investing in both Horizon Oil and Southern Cross 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 Horizon Oil and Southern Cross into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Horizon Oil Limited and Southern Cross Media, you can compare the effects of market volatilities on Horizon Oil and Southern Cross 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 Horizon Oil with a short position of Southern Cross. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Oil and Southern Cross.

Diversification Opportunities for Horizon Oil and Southern Cross

-0.11

Correlation Coefficient

Horizon Oil  Southern Cross

Good diversification

The 3 months correlation between Horizon and Southern is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Oil Limited and Southern Cross Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Cross Media and Horizon Oil 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 Horizon Oil Limited are associated (or correlated) with Southern Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Cross Media has no effect on the direction of Horizon Oil i.e., Horizon Oil and Southern Cross go up and down completely randomly.

Pair Corralation between Horizon Oil and Southern Cross

Assuming the 90 days horizon Horizon Oil Limited is expected to generate 1.12 times more return on investment than Southern Cross. However, Horizon Oil is 1.12 times more volatile than Southern Cross Media. It trades about 0.03 of its potential returns per unit of risk. Southern Cross Media is currently generating about -0.12 per unit of risk. If you would invest  12.00  in Horizon Oil Limited on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Horizon Oil Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Horizon Oil Limited  vs.  Southern Cross Media

Horizon Oil Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Oil Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Horizon Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Southern Cross Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Cross Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Horizon Oil and Southern Cross

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

The idea behind Horizon Oil Limited and Southern Cross Media 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.