Correlation Between San Juan and Strat Petroleum

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

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

Diversification Opportunities for San Juan and Strat Petroleum

0.0

Correlation Coefficient

San Juan  Strat Petroleum

Pay attention - limited upside

The 3 months correlation between San and Strat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Strat Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strat Petroleum and San Juan 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 San Juan Basin are associated (or correlated) with Strat Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strat Petroleum has no effect on the direction of San Juan i.e., San Juan and Strat Petroleum go up and down completely randomly.

Pair Corralation between San Juan and Strat Petroleum

Considering the 90-day investment horizon San Juan is expected to generate 540.66 times less return on investment than Strat Petroleum. But when comparing it to its historical volatility, San Juan Basin is 43.2 times less risky than Strat Petroleum. It trades about 0.01 of its potential returns per unit of risk. Strat Petroleum is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Strat Petroleum on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Strat Petroleum or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

San Juan Basin  vs.  Strat Petroleum

San Juan Basin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Juan Basin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking indicators, San Juan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Strat Petroleum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strat Petroleum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Strat Petroleum disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with San Juan and Strat Petroleum

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

The idea behind San Juan Basin and Strat 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.