Correlation Between International Petroleum and Battalion Oil

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

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

Diversification Opportunities for International Petroleum and Battalion Oil

0.03

Correlation Coefficient

International Petroleum  Battalion Oil

Significant diversification

The 3 months correlation between International and Battalion is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum and Battalion Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battalion Oil Corp and International 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 International Petroleum are associated (or correlated) with Battalion Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battalion Oil Corp has no effect on the direction of International Petroleum i.e., International Petroleum and Battalion Oil go up and down completely randomly.

Pair Corralation between International Petroleum and Battalion Oil

Assuming the 90 days horizon International Petroleum is expected to under-perform the Battalion Oil. But the pink sheet apears to be less risky and, when comparing its historical volatility, International Petroleum is 7.65 times less risky than Battalion Oil. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Battalion Oil Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  290.00  in Battalion Oil Corp on September 4, 2024 and sell it today you would earn a total of  40.00  from holding Battalion Oil Corp or generate 13.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

International Petroleum  vs.  Battalion Oil Corp

International Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Petroleum 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 technical and fundamental 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.

Battalion Oil Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Battalion Oil Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Battalion Oil disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Petroleum and Battalion Oil

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

The idea behind International Petroleum and Battalion Oil 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.