Correlation Between PetroShale and Canadian Overseas

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

By analyzing existing cross correlation between PetroShale and Canadian Overseas Petroleum, you can compare the effects of market volatilities on PetroShale and Canadian Overseas 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 Canadian Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroShale and Canadian Overseas.

Diversification Opportunities for PetroShale and Canadian Overseas

0.77

Correlation Coefficient

PetroShale  Canadian Overseas

Poor diversification

The 3 months correlation between PetroShale and Canadian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Canadian Overseas Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Overseas 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 Canadian Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Overseas has no effect on the direction of PetroShale i.e., PetroShale and Canadian Overseas go up and down completely randomly.

Pair Corralation between PetroShale and Canadian Overseas

If you would invest  2.30  in Canadian Overseas Petroleum on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Canadian Overseas Petroleum or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

PetroShale  vs.  Canadian Overseas Petroleum

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 weak 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.

Canadian Overseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Overseas Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Overseas 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 Canadian Overseas

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

The idea behind PetroShale and Canadian Overseas Petroleum 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.