Correlation Between PetroShale and Ngx Energy

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

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

Diversification Opportunities for PetroShale and Ngx Energy

0.86

Correlation Coefficient

PetroShale  Ngx Energy

Very poor diversification

The 3 months correlation between PetroShale and Ngx is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Ngx Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ngx Energy International and PetroShale 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 PetroShale are associated (or correlated) with Ngx Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ngx Energy International has no effect on the direction of PetroShale i.e., PetroShale and Ngx Energy go up and down completely randomly.

Pair Corralation between PetroShale and Ngx Energy

Assuming the 90 days horizon PetroShale is expected to under-perform the Ngx Energy. But the otc stock apears to be less risky and, when comparing its historical volatility, PetroShale is 1.15 times less risky than Ngx Energy. The otc stock trades about -0.2 of its potential returns per unit of risk. The Ngx Energy International is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Ngx Energy International on September 3, 2024 and sell it today you would lose (5.00) from holding Ngx Energy International or give up 6.41% of portfolio value over 90 days.

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

PetroShale  vs.  Ngx Energy International

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward 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.

Ngx Energy International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ngx Energy International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ngx Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PetroShale and Ngx Energy

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

The idea behind PetroShale and Ngx Energy International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.