Correlation Between Petrofac and Worley Parsons

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

By analyzing existing cross correlation between Petrofac Ltd ADR and Worley Parsons, you can compare the effects of market volatilities on Petrofac and Worley Parsons 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 Petrofac with a short position of Worley Parsons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrofac and Worley Parsons.

Diversification Opportunities for Petrofac and Worley Parsons

0.68

Correlation Coefficient

Petrofac  Worley Parsons

Poor diversification

The 3 months correlation between Petrofac and Worley is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Petrofac Ltd ADR and Worley Parsons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worley Parsons and Petrofac 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 Petrofac Ltd ADR are associated (or correlated) with Worley Parsons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worley Parsons has no effect on the direction of Petrofac i.e., Petrofac and Worley Parsons go up and down completely randomly.

Pair Corralation between Petrofac and Worley Parsons

Assuming the 90 days horizon Petrofac Ltd ADR is expected to under-perform the Worley Parsons. In addition to that, Petrofac is 2.46 times more volatile than Worley Parsons. It trades about -0.03 of its total potential returns per unit of risk. Worley Parsons is currently generating about -0.02 per unit of volatility. If you would invest  975.00  in Worley Parsons on September 4, 2024 and sell it today you would lose (67.00) from holding Worley Parsons or give up 6.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Petrofac Ltd ADR  vs.  Worley Parsons

Petrofac ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrofac Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Worley Parsons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worley Parsons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Worley Parsons is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petrofac and Worley Parsons

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

The idea behind Petrofac Ltd ADR and Worley Parsons 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.